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 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. W.W. Grainger GWW, Ameriprise Financial AMP, Agilent Technologies A and Bloomin’ Brands BLMN 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 buying stocks priced below the market or any reasonable target determined by fundamental analysis. The stocks have solid prospects regarding 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 10% 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 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 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 six 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 9.8%, on average. The Zacks Consensus Estimate for W.W. Grainger’s 2023 earnings has moved 8.4% north to $33.29 per share over the past 60 days.
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.
Ameriprise Financial has a trailing four-quarter earnings surprise of 5.5% on average. The Zacks Consensus Estimate for 2023 earnings has moved 0.4% north to $30.69 per share over the past 60 days.
Agilent Technologies is an original equipment manufacturer of a broad-based portfolio of test and measurement products serving multiple end markets. The company currently carries a Zacks Rank #2.
Agilent has a trailing four-quarter earnings surprise of 7.03%, on average. The Zacks Consensus Estimate for A's fiscal 2023 earnings has moved north by 0.7% to $5.68 per share in the past 60 days.
Bloomin’ Brands is a casual dining restaurant company with a portfolio of differentiated restaurant concepts such as Outback Steakhouse, Carrabba's Italian Grill, Bonefish Grill, Fleming's Prime Steakhouse and Wine Bar and Roy's. The company currently carries a Zacks Rank #2.
Bloomin’ Brands has a trailing four-quarter earnings surprise of 7.51%, on average. The Zacks Consensus Estimate for BLMN’s 2023 earnings has moved 9.7% north to $2.93 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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Agilent Technologies, Inc. (A) : Free Stock Analysis Report
Ameriprise Financial, Inc. (AMP) : Free Stock Analysis Report
W.W. Grainger, Inc. (GWW) : Free Stock Analysis Report
Bloomin' Brands, Inc. (BLMN) : Free Stock Analysis Report
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