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Add These 7 GARP Stocks to Enhance Your Portfolio Returns
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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.
Growth Metrics
Strong earnings growth and solid prospects are the main concepts that GARP investors borrow from the growth investing strategy. However, instead of super-normal growth rates, picking stocks with a more stable and reasonable growth rate is a preferred tactic of GARP investors. Hence, growth rates between 10% and 20% are considered ideal under the 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 another value metric that is considered.
Using the GARP principle, we have run a screen to identify stocks that are likely to 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.)
These few criteria have narrowed down the universe of over 7,700 stocks to only 13.
Here are seven of the 13 stocks that made it through the screen:
Grand Canyon Education, Inc. (LOPE - Free Report) is a regionally accredited provider of online postsecondary education services focused on offering graduate and undergraduate degree programs in its core disciplines of education, business, and healthcare. This Zacks Rank #1 stock has delivered an average four-quarter earnings surprise of 12.3%.
VMware, Inc. provides virtualization solutions from the desktop to the data center. The company delivered an average four-quarter positive earnings surprise of 3.8%. It sports a Zacks Rank #1.
PetMed Express, Inc. (PETS - Free Report) is a leading nationwide pet pharmacy. This Zacks Rank #2 stock has come up with an average four-quarter earnings surprise of 32.9%.
Hill-Rom Holdings, Inc. traces its roots back to 1929 when William A. Hillenbrand formed the company as a division of Hillenbrand Industries. At that time, the company was focused on developing innovative beds and furnishings for hospital patient rooms. Now, after nearly 18 years, Hill-Rom leads the way as an innovator in the medical technology field developing solutions that enhance outcomes for patients and their caregivers. The company pulled off an average four-quarter positive earnings surprise of 7.9%. It carries a Zacks Rank #2.
Universal Health Services, Inc. (UHS - Free Report) is one of the nation's largest and most respected healthcare management companies, operating through its subsidiaries, behavioral health facilities, acute care hospitals and ambulatory centers throughout the United States, the United Kingdom and Puerto Rico. The Zacks Rank #2 stock delivered a positive earnings surprise of 8.7% last quarter.
Asbury Automotive Group, Inc. (ABG - Free Report) is one of the largest automotive retailers. Last quarter, the stock came up with a positive earnings surprise of 13.1%. Asbury Automotive has a Zacks Rank #2.
inTEST Corporation (INTT - Free Report) is an independent designer, manufacturer and marketer of ATE interface solutions and temperature management products, which are used by semiconductor manufacturers to perform final testing of integrated circuits and wafers. The Zacks Rank #2 stock delivered a positive earnings surprise of 121.4% last quarter.
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
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Add These 7 GARP Stocks to Enhance Your Portfolio 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.
Growth Metrics
Strong earnings growth and solid prospects are the main concepts that GARP investors borrow from the growth investing strategy. However, instead of super-normal growth rates, picking stocks with a more stable and reasonable growth rate is a preferred tactic of GARP investors. Hence, growth rates between 10% and 20% are considered ideal under the 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 another value metric that is considered.
Using the GARP principle, we have run a screen to identify stocks that are likely to 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.)
These few criteria have narrowed down the universe of over 7,700 stocks to only 13.
Here are seven of the 13 stocks that made it through the screen:
Grand Canyon Education, Inc. (LOPE - Free Report) is a regionally accredited provider of online postsecondary education services focused on offering graduate and undergraduate degree programs in its core disciplines of education, business, and healthcare. This Zacks Rank #1 stock has delivered an average four-quarter earnings surprise of 12.3%.
VMware, Inc. provides virtualization solutions from the desktop to the data center. The company delivered an average four-quarter positive earnings surprise of 3.8%. It sports a Zacks Rank #1.
PetMed Express, Inc. (PETS - Free Report) is a leading nationwide pet pharmacy. This Zacks Rank #2 stock has come up with an average four-quarter earnings surprise of 32.9%.
Hill-Rom Holdings, Inc. traces its roots back to 1929 when William A. Hillenbrand formed the company as a division of Hillenbrand Industries. At that time, the company was focused on developing innovative beds and furnishings for hospital patient rooms. Now, after nearly 18 years, Hill-Rom leads the way as an innovator in the medical technology field developing solutions that enhance outcomes for patients and their caregivers. The company pulled off an average four-quarter positive earnings surprise of 7.9%. It carries a Zacks Rank #2.
Universal Health Services, Inc. (UHS - Free Report) is one of the nation's largest and most respected healthcare management companies, operating through its subsidiaries, behavioral health facilities, acute care hospitals and ambulatory centers throughout the United States, the United Kingdom and Puerto Rico. The Zacks Rank #2 stock delivered a positive earnings surprise of 8.7% last quarter.
Asbury Automotive Group, Inc. (ABG - Free Report) is one of the largest automotive retailers. Last quarter, the stock came up with a positive earnings surprise of 13.1%. Asbury Automotive has a Zacks Rank #2.
inTEST Corporation (INTT - Free Report) is an independent designer, manufacturer and marketer of ATE interface solutions and temperature management products, which are used by semiconductor manufacturers to perform final testing of integrated circuits and wafers. The Zacks Rank #2 stock delivered a positive earnings surprise of 121.4% last quarter.
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »