Friday, November 19, 2010

What would Buffett say for Garmin's future?

A very interesting article states that the econofinancial future of Garmin may be predicted, if we apply the Buffett's stock-picking strategy. Some of the criteria that are stated in the article and are fulfilled by Garmin are given below:
  1. Market Capitalization should be at least $250M (for Garmin is $5.7B)
  2. Current Ratio should be at least 1.5 (for Garmin is 4.2)
  3. EPS for the latest annual period should be above the EPS in the prior year and 5 years ago
  4. Long-term debt must not be higher than 10% of working capital. This is equivalent to a low Quick Ratio, and for Garmin this ratio is close to 3. 
In the article, some of the criteria of Buffett's strategy are not fulifilled though. But the aferomentioned criteria that are fulfilled, show that Garmin has potential to survive and be a great stock. What is left for Garmin is to change strategy and be able to qualify as a Buffett stock!
For your information, the portfolio of Warren Buffett is given here.

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