Muddy Waters whacks TomTom!

No, not really.

But seriously, check out the carnage. TomTom issued an update confirming that smart phones are essentially killing its industry and Mr. Market has dealt its judgment swiftly.

Often when a company’s shares fall so dramatically, it is a sign of the market overreacting, like this company discussed last week. Unfortunately, the similarities between the two end at share price performance.

TomTom Historical Profitability

TomTom Historical Profitability (from Morningstar.com)

 

As you can see, TomTom is well past its prime, with just four years of strong performance, culminating in the company falling off a cliff in 2008 and showing mediocre returns since. Furthermore, TomTom has a heavy debt load which won’t make things easier as the industry continues to contract. Compare this to the other company which has a long track record of strong returns, growing revenues and free cash flows, no debt and a massive cash hoard.

 

Which company would you rather own?

Author Disclosure: Long the other company.

Talk to Frank about TomTom