Free Garmin Software

Is Garmin a Buffett Stock?

Garmin's earnings have been fairly stable, though they have eroded somewhat over the past few years.

2. Return on equity and debt
Return on equity is a great metric for measuring both management's effectiveness and the strength of a company's competitive advantage or disadvantage -- a classic Buffett consideration. When considering return on equity, it's important to make sure a company doesn't have an enormous debt burden, because that will skew your calculations and make the company look much more efficient than it is.

Since competitive strength is a comparison between peers, and various industries have different levels of profitability and require different levels of debt, it helps to use an industry context.

Source: Capital IQ, a division of Standard & Poor's.

Garmin produces fairly high returns on equity while employing no debt.

3. Management
CEO Min Kao has been at the job since 2002.

4. Business
GPS hardware and technology is rapidly evolving and ripe for technological disruption. The most obvious example is from smartphones with embedded GPS software.

The Foolish conclusion
Regardless of whether Buffett would ever buy Garmin, we've learned that, although the company doesn't operate in a particularly straightforward industry and has had some difficulty hanging on to past earnings rates, it bears some of the other characteristics of a quintessential Buffett investment: high returns on equity without debt and tenured management.

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