Garmin Ltd.GRMNNYSE

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DCF Valuation

DCF Valuation Summary

Hold

Fair Value: $242.40 per share(market-calibrated)

-3.3%

Upside to Fair Value

Current

$250.69

Pure Model

$238.96

Fair Value

$242.40

Bull Case

$303.56

Bear Case

$184.65

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

5.73%

Calibrated Growth

4.05%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $238.96.

What's Driving This Ratingfor GRMN

✓

CapEx already efficient

CapEx at 3.35% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 23.54% — below the sector mature average of 25.89%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $3.3B (24.69% margin).

↑

Strong near-term revenue growth

Analyst consensus projects 10.24% revenue growth in Year 1, fading to 3.75% by Year 5 and 3.75% by Year 10. Revenue reaches $13.5B by Year 10 (vs $7.2B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $180.89/share (19.9x terminal FCF) while exit multiple gives $297.03/share (41.2x terminal FCF). The 28x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.75% growth is more conservative. The base case averages both methods.

🎯

Market pricing in higher long-term growth

To justify $250.69, the market implies 5.73% perpetual growth — 198bps above the model's 3.75%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 67.98% indicates efficient cash generation. FCF reaches $2.5B by Year 10 (18.41% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.00

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)9.00%

Cost of Debt

Pre-tax Cost of Debt0.00%

Tax Rate17.41%

After-tax Cost of Debt0.00%

Equity Weight (E/V)99.66%

Debt Weight (D/V)0.34%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (99.66% × 9.00%) + (0.34% × 0.00%)

= 8.96%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$8.0B	$9.9B	$11.2B	$12.0B	$13.5B
EBIT	$1.9B	$2.3B	$2.7B	$2.9B	$3.3B
Tax	$327M	$407M	$469M	$512M	$578M
NOPAT	$1.6B	$1.9B	$2.2B	$2.4B	$2.7B
+ Depreciation	$191M	$237M	$267M	$288M	$321M
- Capex	$268M	$333M	$375M	$404M	$451M
- Δ NWC	$209M	$336M	$114M	$123M	$137M
Free Cash Flow	$1.3B	$1.5B	$2.0B	$2.2B	$2.5B
Discount Factor	0.918	0.773	0.651	0.548	0.424
Present Value	$1.2B	$1.2B	$1.3B	$1.2B	$1.0B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.5B

Terminal Growth Rate3.75%

WACC8.96%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$49.3B

PV of Terminal Value$20.9B

Exit Multiple Method

Year 10 EBITDA$3.6B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$102.0B

PV of Terminal Value$43.2B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$11.8B

PV of Terminal Value$20.9B

Enterprise Value$32.7B

(-) Net Debt-$2.1B

Equity Value$34.8B

Shares Outstanding192M

Price per Share$180.89

Exit Multiple Method

PV of Projected FCFs$11.8B

PV of Terminal Value$43.2B

Enterprise Value$55.1B

(-) Net Debt-$2.1B

Equity Value$57.2B

Shares Outstanding192M

Price per Share$297.03

Pure Model Fair Value

$238.96

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.75%	3.25%	3.75%	4.25%	4.75%
6.96%	$294.15	$305.36	$320.06	$340.17	$369.37
7.96%	$257.64	$264.21	$272.33	$282.64	$296.16
8.96%	$229.79	$233.97	$238.96	$245.00	$252.48
9.96%	$207.39	$210.22	$213.50	$217.35	$221.94
10.96%	$188.77	$190.76	$193.02	$195.63	$198.65

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$184.65

-26.3% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 1.25

Base Case

$238.96

-4.7% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 1.00

Bull Case

$303.56

21.1% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 0.85

Key Assumptions & Drivers• Technology Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth10.24%

Year 3 Revenue Growth13.62%

Year 5 Revenue Growth3.75%

Year 7 Revenue Growth3.75%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin23.54%

Terminal EBIT Margin25.89%

Tax Rate17.41%

Historical Capex / Rev3.35%

NWC / Revenue28.22%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 28x EV/EBITDA (Technology sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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