Meet the Monster Stock That Continues to Crush the Market

It hasn't drawn the Wall Street attention of its bigger rivals, but there was an electronics maker that more than doubled the stock market's booming returns in 2024. No, I don't mean Apple, which just edged past the 23% gain of the S&P 500 index. This company, a maker of a wide range of consumer products, outperformed by achieving strong profitability and sales growth in some highly competitive industry niches.

The stock in question is Garmin (NYSE: GRMN), which has more than doubled over the past five years compared to the wider market's 82% rise since early 2020. Let's take a look at whether there's more room to run for this monster stock.

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Sales wins in 2024

Garmin is a different company today as compared to when its automotive GPS device dominated the business. Now it maintains five major sales categories, with car navigation being the smallest contributor to annual sales. Those divisions include its fitness segment, home to several popular smartwatch brands, and its marine unit, which markets boat navigation systems. As I said, this is a very different company from the GPS expert you used to know.

You can see the benefit of that diversification in its latest results. While its aviation segment was flat through the first three quarters of 2024, expansions in the fitness, marine, and outdoor divisions allowed sales to rise 19% overall. CEO Cliff Pemble tied that positive momentum to Garmin's steady stream of hit launches like the Fenix 8 multisport watches. "Our highly differentiated and innovative products resonate with customers," he told investors in late October's third-quarter earnings report.

Cashing in on growth

Garmin's profit margins aren't approaching Apple's over 30% rate, but the company is no slouch in this area. Operating profit expanded to 24% of sales in 2024 from a still-healthy 20% of sales a year earlier. Bullish investors need that figure to keep climbing for Garmin's stock to maintain its positive momentum in 2025 and beyond.

GRMN Operating Margin (TTM) data by YCharts

The surest path toward that goal is for Garmin to introduce more hit products in areas like fitness trackers and high-end smartwatches. The operating profit margin for its outdoor segment, home to adventure watch brands like Fenix, is roughly double the larger company's average. That helps explain why Garmin has a packed pipeline ahead for releases across its portfolio.

Looking to February

Investors will have to wait until Garmin's fiscal fourth-quarter earnings update in February to learn exactly how well the company did over the critical holiday shopping season. But the bigger factor driving the growth stock's returns will be management's official outlook for 2025. Heading into that report, most Wall Street pros are expecting 2025 sales to rise by roughly 10% after a projected 18% spike in 2024. Earnings could improve to about $7 per share in that scenario.

Those targets mean Garmin stock is valued at a pricey 30 times expected earnings as of early 2025. That's not far from what you could own Apple for today. For Garmin to continue generating market-thumping returns, then, investors will need to see another year of strong sales growth and above 20% operating profit margin. Those are ambitious goals, but Garmin has demonstrated over the past decade that it can consistently win in some competitive niches like smartwatches and fitness trackers.

Combined with its diverse product portfolio, that success translates into decent growth potential with a modest risk of collapsing sales during any downturn. Investors might want to keep this stock on their watch list, then, as its positive momentum looks set to continue beyond 2024.

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Demitri Kalogeropoulos has positions in Apple. The Motley Fool has positions in and recommends Apple and Garmin. The Motley Fool has a disclosure policy.