4 GARP Stocks to Scoop Up for Maximum Returns
Growth at a reasonable price or GARP is an excellent strategy to earn quick profits from investments. The GARP approach helps identify stocks that are priced below the market or any reasonable target determined by fundamental analysis.
The strategy helps investors gain exposure to stocks with impressive prospects and trading at a discount. GARP stocks have solid prospects in terms of cash flow, revenues, earnings per share (EPS) and others.
Therefore, a portfolio based on the GARP strategy contains stocks that offer the best value and growth investing. Ameriprise Financial AMP, W.W. Grainger GWW, FMC Corp FMC and Allegion ALLE are some GARP stocks that hold promise.
GARP Metrics — Mix of Growth & Value Metrics
The GARP strategy seeks to offer an ideal investment by utilizing the best features of 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. The stocks have solid prospects in terms of cash flow, revenues, EPS and others.
A 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 a tactic of GARP investors. Growth rates between 5% and 20% are considered ideal under the GARP strategy.
Another growth metric considered by growth and GARP investors is the return on equity (ROE). GARP investors look for strong and higher ROE than the industry average to identify superior stocks. Moreover, stocks with a positive cash flow find precedence under the GARP plan.
GARP investing prioritizes one of the popular value metrics — the price-to-earnings (P/E) ratio. Though the investing style picks stocks with higher P/E ratios than value investors, it avoids companies with extremely high P/E ratios. 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.
Along with the criteria discussed in the above section, we have considered a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Last 5-year EPS & projected 3-5-year EPS growth rates between 5% 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 the 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 nine stocks that made it through the screen:
Ameriprise Financial is a diversified financial services company that offers a wide range of products and services focused on financial planning and advice. The company helps its individual and institutional clients achieve their financial objectives. AMP currently carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.
Ameriprise Financial has a trailing four-quarter earnings surprise of 5.5% on average. The Zacks Consensus Estimate for 2023 earnings has moved 3.5% north to $30.13 per share over the past 60 days.
W.W. Grainger is a broad-line, business-to-business distributor of maintenance, repair and operating products and services primarily in North America, Japan and the U.K. The company currently carries a Zacks Rank #2.
W.W. Grainger has a trailing four-quarter earnings surprise of 10.1%, on average. The Zacks Consensus Estimate for W.W. Grainger’s 2023 earnings has moved 0.4% north to $30.70 per share over the past 30 days.
FMC is an agricultural sciences company offering innovative solutions to farmers globally. It has a robust product portfolio and a development pipeline in crop protection, plant health, and professional pest and turf management. The company currently carries a Zacks Rank #2.
FMC has a trailing four-quarter earnings surprise of 7.89%, on average. The Zacks Consensus Estimate for FMC’s 2023 earnings has moved 0.7% north to $8.34 per share over the past 30 days.
Allegion is a leading global provider of security products and solutions for business and domestic purposes. Its extensive portfolio of mechanical and electronic security products includes doors and door systems, electronic security products, biometric and mobile access control systems, locks, locksets, exit devices, portable locks, and workforce productivity systems. The company currently carries a Zacks Rank #2.
Allegion has a trailing four-quarter earnings surprise of 8.8%, on average. The Zacks Consensus Estimate for ALLE’s 2023 earnings has moved 0.2% north to $6.12 per share over the past 30 days.
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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.
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Ameriprise Financial, Inc. (AMP) : Free Stock Analysis Report
W.W. Grainger, Inc. (GWW) : Free Stock Analysis Report
FMC Corporation (FMC) : Free Stock Analysis Report
Allegion PLC (ALLE) : Free Stock Analysis Report
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