We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Growth at a reasonable price or GARP is an excellent way for investors to make some quick gains. This strategy helps investors gain exposure to stocks that have impressive prospects and are trading at a discount.
The GARP approach leads to the identification of stocks that are priced below the market or any reasonable target determined by fundamental analysis. These stocks also have solid prospects in terms of cash flow, revenues, earnings per share (EPS) and so on.
That means a portfolio created on the basis of GARP strategy is expected to have stocks that offer the best of both value and growth investing.
GARP Metrics – Mix of Growth & Value Metrics
The GARP strategy seeks to offer an ideal investment by utilizing the best features of both value and growth investing. Investors adopting the GARP approach will prefer to buy stocks that are priced below the market or any reasonable target determined by fundamental analysis. These stocks also have solid prospects in cash flow, revenues, earnings per share (EPS) and so on.
Growth Metrics
Both strong earnings growth history and impressive earnings prospects are the main concepts that GARP investors borrow from the growth investing strategy. However, instead of super-normal growth rates, pursuing stocks with a more stable and reasonable growth rate is also a tactic of GARP investors. Hence, growth rates between 10% and 20% are considered ideal under the GARP strategy.
Another growth metric that is considered by both growth and GARP investors is return on equity (ROE). GARP investors look for strong and higher ROE compared to the industry average to identify superior stocks. Moreover, stocks with positive cash flow find precedence under the GARP plan.
Value Metrics
GARP investing gives priority to one of the popular value metrics – price-to-earnings (P/E) ratio. Though this investing style picks stocks with higher P/E ratios compared to value investors, it avoids companies with extremely high P/E ratios. Moreover, the price-to-book value (P/B) ratio is also considered.
Using the GARP principle, we have run a screen to identify stocks that should offer solid returns in the near term.
Screening Parameters
Along with the criteria discussed in the above section, we have considered a favorable Zacks Rank #1 (Strong Buy) or 2 (Buy).
Last 5-year EPS & projected 3–5 year EPS growth rates between 10% and 20% (Strong EPS growth history and prospects ensure improving business.)
ROE (over the past 12 months) greater than the industry average (Higher ROE compared to the industry average indicates superior stocks.)
P/E and P/B ratios less than M-industry average (P/E and P/B ratios less than that of the industry indicate that the stocks are undervalued.)
Here are four of the 7 stocks that made it through the screen:
EMCOR Group, Inc. (EME - Free Report) is a provider of mechanical and electrical construction as well as industrial and energy infrastructure services for a diverse range of businesses. The company carries a Zacks Rank #1 (Strong Buy). It has delivered an average four-quarter earnings surprise of 24.5%.You can see the complete list of today’s Zacks #1 Rank stocks here.
Koppers Holdings Inc. (KOP - Free Report) is an integrated global provider of treated wood products, wood treatment chemicals and carbon compounds. The company sports a Zacks Rank #1. It has delivered an average four-quarter earnings surprise of 18.4%.
O’Reilly Automotive, Inc. (ORLY - Free Report) is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States. It sells products to both Do-it-Yourself (DIY) customers, Do-it-for-Me (DIFM) and professional installers. The company flaunts a Zacks Rank #1. It delivered an average positive earnings surprise of 3.26% in the trailing four quarters.
Celanese Corporation (CE - Free Report) is a global hybrid chemical company that produces chemical substances and materials. The company has a Zacks Rank #2 (Buy). It delivered an average positive earnings surprise of 13.3% in the trailing four quarters.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back testing software.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Image: Bigstock
4 GARP Stocks to Scoop Up for Maximum Returns
Growth at a reasonable price or GARP is an excellent way for investors to make some quick gains. This strategy helps investors gain exposure to stocks that have impressive prospects and are trading at a discount.
The GARP approach leads to the identification of stocks that are priced below the market or any reasonable target determined by fundamental analysis. These stocks also have solid prospects in terms of cash flow, revenues, earnings per share (EPS) and so on.
That means a portfolio created on the basis of GARP strategy is expected to have stocks that offer the best of both value and growth investing.
GARP Metrics – Mix of Growth & Value Metrics
The GARP strategy seeks to offer an ideal investment by utilizing the best features of both value and growth investing. Investors adopting the GARP approach will prefer to buy stocks that are priced below the market or any reasonable target determined by fundamental analysis. These stocks also have solid prospects in cash flow, revenues, earnings per share (EPS) and so on.
Growth Metrics
Both strong earnings growth history and impressive earnings prospects are the main concepts that GARP investors borrow from the growth investing strategy. However, instead of super-normal growth rates, pursuing stocks with a more stable and reasonable growth rate is also a tactic of GARP investors. Hence, growth rates between 10% and 20% are considered ideal under the GARP strategy.
Another growth metric that is considered by both growth and GARP investors is return on equity (ROE). GARP investors look for strong and higher ROE compared to the industry average to identify superior stocks. Moreover, stocks with positive cash flow find precedence under the GARP plan.
Value Metrics
GARP investing gives priority to one of the popular value metrics – price-to-earnings (P/E) ratio. Though this investing style picks stocks with higher P/E ratios compared to value investors, it avoids companies with extremely high P/E ratios. Moreover, the price-to-book value (P/B) ratio is also considered.
Using the GARP principle, we have run a screen to identify stocks that should offer solid returns in the near term.
Screening Parameters
Along with the criteria discussed in the above section, we have considered a favorable Zacks Rank #1 (Strong Buy) or 2 (Buy).
Last 5-year EPS & projected 3–5 year EPS growth rates between 10% and 20% (Strong EPS growth history and prospects ensure improving business.)
ROE (over the past 12 months) greater than the industry average (Higher ROE compared to the industry average indicates superior stocks.)
P/E and P/B ratios less than M-industry average (P/E and P/B ratios less than that of the industry indicate that the stocks are undervalued.)
Here are four of the 7 stocks that made it through the screen:
EMCOR Group, Inc. (EME - Free Report) is a provider of mechanical and electrical construction as well as industrial and energy infrastructure services for a diverse range of businesses. The company carries a Zacks Rank #1 (Strong Buy). It has delivered an average four-quarter earnings surprise of 24.5%.You can see the complete list of today’s Zacks #1 Rank stocks here.
Koppers Holdings Inc. (KOP - Free Report) is an integrated global provider of treated wood products, wood treatment chemicals and carbon compounds. The company sports a Zacks Rank #1. It has delivered an average four-quarter earnings surprise of 18.4%.
O’Reilly Automotive, Inc. (ORLY - Free Report) is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States. It sells products to both Do-it-Yourself (DIY) customers, Do-it-for-Me (DIFM) and professional installers. The company flaunts a Zacks Rank #1. It delivered an average positive earnings surprise of 3.26% in the trailing four quarters.
Celanese Corporation (CE - Free Report) is a global hybrid chemical company that produces chemical substances and materials. The company has a Zacks Rank #2 (Buy). It delivered an average positive earnings surprise of 13.3% in the trailing four quarters.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back testing software.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.