Small GPS Players Could Outperform Larger Competitors
Smaller GPS companies like Location Based Technologies, Inc. (LBAS) could outperform larger competitors like Garmin Ltd. (GRMN) in 2009 and 2010.
Location Based Technologies, Inc. [[LBAS.OB]] may have a modest market capitalization of just $54 million right now, but many industry experts believe that these small players may be poised to rapidly grow in the relatively stagnant market for global position system devices. The company’s unique GPS-enabled personal locators represent a move away from the traditional vehicle navigation systems that have driven the industry’s growth over the past three years into a higher-growth segment of the GPS market that could see substantial growth in the future.
Location Based Technologies recently released its PocketFinder series of personal location devices. These small, mobile GPS units can be used to track family members, pets, luggage, children and other things quickly and easily using easily accessible software. Moreover, the company has developed a unique software solution that not only supports these devices, but also potential competing GPS-enabled products like iPhones, Androids, and Blackberries for at a one-time cost or monthly subscription fee.
During its latest quarter, Location Based Technologies reported a net loss of $939,517, or $0.02 per share, on revenues of just $70,782 for “consulting services”. However, the company noted in a recent press release that it expects sales to exceed $12.5 million during the first twelve months from launch of its PocketFinder product and services. With total 2008 operating expenses of just $5.4 million, this could equate to net income of around $7 million, or $0.07 per share, if expense levels and the share count remain about the same.
Meanwhile, industry bellwether Garmin Ltd. [[GRMN]] has been suffering from a combination of slower consumer spending and lower auto sales. The company famous for its vehicle navigation systems has also seen a slowdown in demand thanks to GPS technologies being incorporated into competing devices, such as mobile handsets and new automobiles through factory-installed systems. Unfortunately, nearly 72.6 percent of Garmin’s gross sales come from this problematic auto segment, according to their latest 10-K filing with the SEC.
Garmin has been diversifying into higher growth areas, but overall growth may be doomed to slow down over the next couple years. A large company like Garmin has experienced much of its growth already, whereas smaller companies operating in higher-growth segments may be poised to grow more rapidly. And for investors, its growth rates that determine earnings multiples and share valuations. That’s why smaller GPS companies like Location Based Technologies may be worth a second look when compared to larger companies like Garmin.
Finally, it is important to remember that smaller companies like Location Based Technologies aren’t for all investors. The company is not profitable and carries a substantial amount of risk given its operating history. Meanwhile, the personal locator industry is still unproven and could face challenges ahead. By comparison, Garmin is a profitable and established company that is still growing and offers a steady dividend and relatively low valuation for investors. So, prudent investors may want to stay away for now, but speculators may find that 2009 and 2010 may be a year for new technologies and smaller companies in the GPS space in terms of growth.
CONTACT: Daniel Minton, Managing Director, 406-862-5400, daniel@accelerize.com