Last 5-year EPS & projected 3-5-year EPS growth rates between 5% and 20% (Strong EPS growth history and prospects ensure improving business.) Screening ParametersĪlong with the criteria discussed in the above section, we have considered a Zacks Rank #1 (Strong Buy) or 2 (Buy). Using the GARP principle, we ran a screen to identify stocks that should offer solid returns in the near term. Though this investing style picks stocks with higher P/E ratios than value investors, it avoids companies with extremely high P/E ratios. GARP investing prioritizes the popular value metrics - the price-to-earnings (P/E) and price-to-book (P/B) ratios. Moreover, stocks with positive cash flows find precedence under the GARP plan. GARP investors look for a strong and higher ROE than the industry average to identify superior stocks. Hence, growth rates between 5% and 20% are considered ideal under the GARP strategy.Īnother growth metric that both growth and GARP investors consider is the return on equity (ROE). However, instead of super-normal growth rates, pursuing stocks with a more stable and reasonable growth rate is a tactic of GARP investors. These stocks also have solid prospects in terms of cash flow, revenues, earnings per share (EPS) and so on.Ī strong earnings growth history and impressive earnings prospects are the main concepts that GARP investors borrow from the growth investing strategy. Investors adopting the GARP approach prefer buying stocks priced below the market or any reasonable target determined by fundamental analysis. The GARP strategy seeks to offer an ideal investment by utilizing the best features of both value and growth investing. GARP Metrics - Mix of Growth & Value Metrics Grainger ( GWW Quick Quote GWW - Free Report), Hubbell ( HUBB Quick Quote HUBB - Free Report), Allegion ( ALLE Quick Quote ALLE - Free Report) and Grand Canyon Education ( LOPE Quick Quote LOPE - Free Report) are some GARP stocks that hold promise. Unlike a blend strategy, a portfolio that uses GARP investing is expected to include stocks that offer the best of both value and growth investing. The strategy helps investors gain exposure to undervalued stocks with impressive prospects. If you are looking for a profitable portfolio of stocks offering the best of value and growth investing, try the growth at a reasonable price or GARP strategy.
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