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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 chances regarding cash flow, revenues, earnings per share (EPS) and others.
A portfolio based on the GARP strategy comprises stocks that offer the best value and growth investment. Caterpillar (CAT - Free Report) , A.O. Smith (AOS - Free Report) , CDW Corporation (CDW - Free Report) and Automatic Data Processing (ADP - Free Report) are some GARP stocks that hold promise.
GARP Metrics — Mix of Growth & Value Metrics
The GARP strategy offers ideal investment options utilizing the best value and growth investing features. 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, etc.
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. The GARP strategy considers growth rates between 5% and 20% ideal.
Another 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.
Value Metrics
GARP investing prioritizes one of the popular value metrics — the price-to-earnings (P/E) ratio. The investing style picks stocks with higher P/E ratios than value investors, but 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 five-year EPS & projected 3-5-year EPS growth rates between 5% and 20% (Strong EPS growth history and prospects ensure improving business.)
ROE (in 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 are less than the M-industry average (P/E and P/B ratios less than the industry indicate that the stocks are undervalued.)
Here are four of the eight stocks that made it through the screen:
Caterpillar is a global construction and mining equipment manufacturer. It serves infrastructure, construction, mining, oil & gas, and transportation sectors. It has more than 4 million products with an extensive dealer network of 165 dealers spanning 191 countries. The company currently carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.
Caterpillar has a trailing four-quarter earnings surprise of 18.5% on average. The Zacks Consensus Estimate for CAT’s 2023 earnings has moved 2.2% north to $19.87 per share over the past 60 days.
A.O. Smith is one of the leading manufacturers of commercial and residential water heating equipment and water treatment products worldwide. The company carries a Zacks Rank #2.
A.O. Smith has a trailing four-quarter earnings surprise of 10.5% on average. The Zacks Consensus Estimate for 2023 earnings has moved 0.3% north to $3.59 per share over the past 60 days.
CDW is a leading provider of integrated information technology solutions to small, medium and large businesses, government, education and healthcare customers. The company currently carries a Zacks Rank #2.
CDW has a trailing four-quarter earnings surprise of 3.9% on average. The Zacks Consensus Estimate for 2023 earnings has moved 0.4% north to $9.73 per share over the past 60 days.
Automatic Data Processing provides cloud-based Human Capital Management technology solutions, including payroll, talent management, human resources and benefits administration, and time and attendance management. The company currently carries a Zacks Rank #2.
Automatic Data Processing has a trailing four-quarter earnings surprise of 3.1%, on average. The Zacks Consensus Estimate for fiscal 2024 earnings has moved 0.1% north to $9.14 per share over the past 60 days.
Get the remaining stocks on the list and start testing this and other ideas. 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.
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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 chances regarding cash flow, revenues, earnings per share (EPS) and others.
A portfolio based on the GARP strategy comprises stocks that offer the best value and growth investment. Caterpillar (CAT - Free Report) , A.O. Smith (AOS - Free Report) , CDW Corporation (CDW - Free Report) and Automatic Data Processing (ADP - Free Report) are some GARP stocks that hold promise.
GARP Metrics — Mix of Growth & Value Metrics
The GARP strategy offers ideal investment options utilizing the best value and growth investing features. 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, etc.
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. The GARP strategy considers growth rates between 5% and 20% ideal.
Another 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.
Value Metrics
GARP investing prioritizes one of the popular value metrics — the price-to-earnings (P/E) ratio. The investing style picks stocks with higher P/E ratios than value investors, but 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 five-year EPS & projected 3-5-year EPS growth rates between 5% and 20% (Strong EPS growth history and prospects ensure improving business.)
ROE (in 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 are less than the M-industry average (P/E and P/B ratios less than the industry indicate that the stocks are undervalued.)
Here are four of the eight stocks that made it through the screen:
Caterpillar is a global construction and mining equipment manufacturer. It serves infrastructure, construction, mining, oil & gas, and transportation sectors. It has more than 4 million products with an extensive dealer network of 165 dealers spanning 191 countries. The company currently carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.
Caterpillar has a trailing four-quarter earnings surprise of 18.5% on average. The Zacks Consensus Estimate for CAT’s 2023 earnings has moved 2.2% north to $19.87 per share over the past 60 days.
A.O. Smith is one of the leading manufacturers of commercial and residential water heating equipment and water treatment products worldwide. The company carries a Zacks Rank #2.
A.O. Smith has a trailing four-quarter earnings surprise of 10.5% on average. The Zacks Consensus Estimate for 2023 earnings has moved 0.3% north to $3.59 per share over the past 60 days.
CDW is a leading provider of integrated information technology solutions to small, medium and large businesses, government, education and healthcare customers. The company currently carries a Zacks Rank #2.
CDW has a trailing four-quarter earnings surprise of 3.9% on average. The Zacks Consensus Estimate for 2023 earnings has moved 0.4% north to $9.73 per share over the past 60 days.
Automatic Data Processing provides cloud-based Human Capital Management technology solutions, including payroll, talent management, human resources and benefits administration, and time and attendance management. The company currently carries a Zacks Rank #2.
Automatic Data Processing has a trailing four-quarter earnings surprise of 3.1%, on average. The Zacks Consensus Estimate for fiscal 2024 earnings has moved 0.1% north to $9.14 per share over the past 60 days.
Get the remaining stocks on the list and start testing this and other ideas. 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.