Yahoo Finance 4 GARP Stocks to Scoop Up for Maximum Returns
Growth at a reasonable price, or GARP, is an excellent strategy to earn quick investment profits. The GARP approach helps identify stocks priced below the market or any suitable target determined by a 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.
A portfolio based on the GARP strategy comprises stocks that offer the best of value and growth investing. W.W. Grainger GWW, Hubbell HUBB, Allegion ALLE and Grand Canyon Education LOPE are some GARP stocks that hold promise.
GARP Metrics — Mix of Growth & Value Metrics
The GARP strategy offers ideal investment options by utilizing the best features of value and growth investing. Investors adopting the GARP approach prefer stocks priced below the market or any reasonable target determined by fundamental analysis. The stocks have solid prospects based on cash flow, revenues, EPS and others.
Growth Metrics
A strong earnings growth history and impressive earnings prospects are the primary concepts that GARP investors borrow from the growth investing strategy. However, instead of super-normal 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 metric considered by growth and GARP investors is 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.
Value Metrics
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 taken into consideration.
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 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 with 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:
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 sports a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.
W.W. Grainger has a trailing four-quarter earnings surprise of 9.15%, on average. The Zacks Consensus Estimate for W.W. Grainger’s 2023 earnings has moved 6.8% north to $35.54 per share over the past 60 days.
Hubbell designs and manufactures electrical and electronic products such as plugs, receptacles, connectors, data signal processing components, lighting fixtures, and high-voltage test and measurement equipment. The company currently flaunts a Zacks Rank #1.
Hubbell has a trailing four-quarter earnings surprise of 21.01% on average. The Zacks Consensus Estimate for HUBB’s 2023 earnings has moved 22.5% north to $13.81 per share over the past 60 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 12.49%, on average. The Zacks Consensus Estimate for ALLE’s 2023 earnings has moved 4.1% north to $6.62 per share over the past 60 days.
Grand Canyon Education is an accredited provider of online post-secondary education services focused on offering graduate and undergraduate degree programs in its core disciplines of education, business and healthcare. The company currently carries a Zacks Rank #2.
Grand Canyon Education has a trailing four-quarter earnings surprise of 6.34%, on average. The Zacks Consensus Estimate for LOPE's 2023 earnings has moved 0.6% north to $6.43 per share over the past 60 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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W.W. Grainger, Inc. (GWW) : Free Stock Analysis Report
Grand Canyon Education, Inc. (LOPE) : Free Stock Analysis Report
Allegion PLC (ALLE) : Free Stock Analysis Report
Hubbell Inc (HUBB) : Free Stock Analysis Report
