Garmin Ltd. (GRMN) DCF Valuation & Fundamental Primer
Garmin Ltd. (GRMN) currently trades at $204.04 with an enterprise value of $23.82B. Our proprietary institutional model rates Garmin Ltd. at 73/100 (Grade: B+ · Quality Software Operator). The current market price prices in an implied 5-year revenue CAGR of 22.3% vs. historical growth of 10.7% (Aggressive Growth Expectations Priced In).
Institutional fundamental teardown of Garmin Ltd. (GRMN) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
Garmin Ltd. (GRMN) 3-Scenario DCF Valuation Range
Stress-test GRMN's 5-year growth, target FCF margin, WACC, terminal methodology, and SBC/dilution friction in real time.
Split between 5-Year Explicit Cash Flows and Discounted Terminal Value
2D Institutional Valuation Sensitivity Heatmap
Implied share price & upside/downside spread across 25 valuation states (Current Price: $204.04).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $147.57 -28% | $156.07 -24% | $165.99 -19% | $177.71 -13% | $191.77 -6% |
| 9.3% | $133.70 -34% | $140.40 -31% | $148.08 -27% | $157.00 -23% | $167.47 -18% |
| 10.0% | $122.29 -40% | $127.67 -37% | $133.77 -34% | $140.75 -31% | $148.79 -27% |
| 10.8% | $112.74 -45% | $117.15 -43% | $122.08 -40% | $127.65 -37% | $133.99 -34% |
| 11.5% | $104.64 -49% | $108.29 -47% | $112.34 -45% | $116.88 -43% | $121.98 -40% |
Institutional Software Quality Scorecard (73/100 · Grade B+)
Solid software model with clear operating leverage, partially offset by standard SBC or moderate burn.
Solid cash generation with minor working capital absorption
Minimal dilution friction; management compensation aligned with shareholders
Sub-par gross margins; higher cost of delivery or hardware/services mix
Positive net cash cushion; self-funding operations with zero insolvency risk
Core Investment Strengths & Moats
- Low dilution friction: SBC is only 2.2% of revenue
- Net cash positive: $1.92B balance sheet buffer
Key Operational & Dilution Risks
- Lower software gross margins (58.7%), indicating higher hosting or service delivery drag
Reverse-DCF Solver: What Growth is Priced Into GRMN?
The current share price demands 22.3% 5-year CAGR (24.2% net of SBC & dilution)—a +11.5% acceleration over historical run-rate (10.7%). Any growth slowdown risks valuation multiple contraction.
Headline Reverse-DCF ignores Stock-Based Compensation (2.2% of revenue) and annual share dilution (0.3%/yr). Accounting for both requires 24.2% 5-year revenue CAGR to justify $204.04/sh on a true per-share economic cash flow basis.
Garmin Ltd. (GRMN) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $6.30B | $6.30B | $6.97B | $7.72B | $8.55B | $9.47B | $10.49B |
| Gross Profit | $3.70B | $3.70B | $4.09B | $4.53B | $5.02B | $5.56B | $6.16B |
| Operating Income (EBIT) | $1.59B | $1.59B | $1.76B | $1.95B | $2.16B | $2.40B | $2.65B |
| Stock-Based Compensation (SBC) | $137.2M | $137.3M | $152.0M | $168.3M | $186.4M | $206.4M | $228.6M |
| Unlevered Free Cash Flow (FCF) | $1.24B | $1.24B | $1.37B | $1.52B | $1.68B | $1.86B | $2.06B |
| SBC-Adjusted True Cash Flow | $1.10B | $1.10B | $1.22B | $1.35B | $1.50B | $1.66B | $1.83B |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -12.1 + 0.48 × (Rule of 40) · R² = 64%Stocks below the gold regression line trade at a discount relative to their Rule of 40 compounding efficiency.
| Company | Ticker | Market Cap | TTM Revenue | Gross Margin | FCF Margin | Rule of 40 | SBC % Rev | EV / Rev |
|---|---|---|---|---|---|---|---|---|
| Garmin Ltd. | GRMN | $39.26B | $6.30B | 58.7% | 19.7% | 30.4% | 2.2% | 5.9× |
| ServiceNow | NOW | $152.61B | $10.98B | 79.2% | 31.1% | 54.2% | 15.9% | 13.9× |
| Workday, Inc. | WDAY | $50.35B | $8.00B | 75.0% | 27.4% | 43.9% | 19.0% | 6.4× |
| Salesforce | CRM | $217.10B | $37.90B | 77.2% | 32.8% | 42.8% | 8.4% | 5.8× |
| Datadog | DDOG | $46.05B | $2.68B | 80.8% | 31.1% | 57.7% | 21.3% | 17.4× |
| Snowflake Inc. | SNOW | $71.79B | $3.63B | 66.5% | 25.2% | 57.7% | 40.8% | 20.0× |
| Hubspot | HUBS | $19.89B | $2.63B | 85.0% | 21.3% | 52.7% | 19.2% | 7.7× |
| Peer Cohort Median Benchmark (N=6) | 78.2% | 29.2% | 53.5% | 19.1% | 10.8× | |||
EV / Revenue Multiple Compression Stress Test
| Multiple Scenario | EV / Revenue | Implied Enterprise Value | Implied Equity Value | Implied Share Price | Delta vs Current |
|---|---|---|---|---|---|
| Current Multiple | 5.9× | $37.34B | $39.26B | $204.04 | 0.0% |
| -20% Multiple Compression | 4.7× | $29.87B | $31.79B | $165.22 | -20.0% |
| -35% Multiple Compression | 3.9× | $24.27B | $26.19B | $136.11 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $31.48B | $33.40B | $173.60 | -15.7% |
Frequently Asked Questions: Garmin Ltd. (GRMN) Valuation
What is Garmin Ltd. (GRMN)'s intrinsic DCF valuation and implied share price?
Based on audited SEC 10-K/10-Q filings and a 5-year 3-statement discounted cash flow (DCF) model, Garmin Ltd. (GRMN) has a Base Case implied value of $133.79 per share (with a Bear Case of $73.97 and a Bull Case of $206.62), compared to its current price of $204.04. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is Garmin Ltd. (GRMN)'s Rule of 40 score and Free Cash Flow margin?
Garmin Ltd. achieves a Rule of 40 score of 30.4%, combining a 10.7% revenue growth run-rate with a 19.7% TTM free cash flow margin on $6.30B in trailing twelve-month revenue. In the Software & Cloud Services peer cohort, the median Rule of 40 benchmark is 53.5%.
What revenue growth rate is priced into GRMN stock according to Reverse-DCF analysis?
At $204.04 per share (Enterprise Value of $37.34B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 22.3%, compared to Garmin Ltd.'s historical CAGR of 10.7%. Overall market expectations are rated as "Aggressive Growth Expectations Priced In".
How does Garmin Ltd. compare to Software & Cloud Services software peers?
Garmin Ltd. (GRMN) earns an institutional Software Quality Score of 73/100 (Grade B+ — Quality Software Operator). Across its Software & Cloud Services peer group (NOW, WDAY, CRM, DDOG, SNOW), the cohort trades at a median EV/TTM Revenue multiple of 10.8× and a median gross margin of 78.2%.
How does Stock-Based Compensation (SBC) impact Garmin Ltd. (GRMN)'s valuation?
Garmin Ltd. recorded $137.2M in TTM stock-based compensation (2.2% of revenue). When treating SBC as a cash-equivalent compensation expense, Garmin Ltd.'s SBC-adjusted free cash flow yield is 2.8%, scoring 25/25 on our Shareholder Dilution Friction pillar.