2-Star Stocks Poised to Plunge: Garmin?

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Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, navigation-device maker Garmin (NAS: GRMN) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Garmin's business and see what CAPS investors are saying about the stock right now.

Garminfacts

Headquarters (Founded)Schaffhausen, Switzerland (2000)
Market Cap$6.68 billion
IndustryConsumer electronics
Trailing-12-Month Revenue$2.71 billion
Management

CEO Dr. Min Kao (since 2002)

COO Clifton Pemble (since 2007)

Return on Equity (Average, Past 3 Years)23.5%
Cash/Debt$1.48 billion / $0
Competitors

Apple (NAS: AAPL)

Google (NAS: GOOG)

Research In Motion (NAS: RIMM)

Sources: S&P Capital IQ and Motley Fool CAPS. 

On CAPS, 9% of the 4,872 members who have rated Garmin believe the stock will underperform the S&P 500 going forward. These bears include paids and Jeffrey2012

This past summer, paids touched on the main concern surrounding the stock: "GPS on all the new phones will kill Garmin. Too much competition and this company did not adapt quickly enough to changing market conditions."

Over the next five years, in fact, Garmin is expected to grow its bottom line at a paltry rate of 4% annually. That's naturally much slower than smartphone players like Apple (22%), Google (19%), and Research In Motion (9%).

CAPS member Jeffrey2012 elaborates on the bear case:

The [GPS] market is suffering from a slow death as its uniqueness continues to dwindle. Its main issue is the onslaught of smartphones with gps and cheap knockoffs from other manufacturers.

Just looking at stores such as [Wal-Mart] and [Best Buy], there is hardly an urgency from customers looking to buy a garmin.

The stock isn't going to disappear since it is quite shareholder friendly. But unless it can turn around the business, it's going to continue shrinking and well, that can only mean a shrinkage of the stock as well.

What do you think about Garmin, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!

Interested in another easy way to trackGarmin?Add it to your watchlist.

At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Apple, Google, and Wal-Mart, and Best Buy. Motley Fool newsletter services have recommended buying shares of Apple, Google, and Wal-Mart, as well as creating a bull call spread position in Apple, a diagonal call position in Wal-Mart, and an iron condor position in Garmin. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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