Yahoo Finance Scoop up These 4 GARP Stocks to Receive Handsome Returns
If you are looking for a profitable portfolio of stocks offering the best of value and growth investing, try the growth at a reasonable price or GARP strategy.
The strategy helps investors gain exposure to undervalued stocks with impressive prospects. Unlike a blend strategy, a portfolio that uses GARP investing is expected to include stocks that offer the best value and growth investing. Hubbel HUBB, Caterpillar CAT, The Timken Company TKR and HCA Healthcare HCA 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 prefer buying stocks 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.
Growth Metrics
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. Hence, growth rates between 10% and 20% are considered ideal under the GARP strategy.
Another metric that growth and GARP investors consider is the return on equity (ROE). GARP investors look for a strong and higher ROE than the industry average to identify superior stocks. Stocks with positive cash flows find precedence under the GARP plan.
Value Metrics
GARP investing prioritizes the popular value metrics — the price-to-earnings (P/E) and price-to-book (P/B) ratios. Though this investing style picks stocks with higher P/E ratios than value investors, it avoids companies with extremely high P/E ratios.
Using the GARP principle, we ran 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 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 than 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 stocks that made it through the screen:
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 carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.
Hubbel has gained 55.7% in a year. It has a trailing four-quarter earnings surprise of 14.7% on average. The Zacks Consensus Estimate for HUBB’s 2024 earnings has moved 0.1% north to $16.43 per share over the past 30 days.
Caterpillar is the largest global construction and mining equipment manufacturer. It serves a gamut of sectors like infrastructure, construction, mining, oil & gas, and transportation. The company currently carries a Zacks Rank #2.
Caterpillar has gained 69.2% in a year. It has a trailing four-quarter earnings surprise of 19.7%, on average. The Zacks Consensus Estimate for 2024 earnings has moved 0.3% north to $21.30 per share over the past 30 days.
The Timken Company is a global manufacturer of engineered bearings and industrial motion products. It serves a wide variety of end markets, including aerospace, automotive, construction, consumer, defense, energy, industrial equipment, health, heavy industry, machine tools, positioning control, power generation, and rail markets. The company currently carries a Zacks Rank #2.
TKR has gained 15.5% over a year. It has a trailing four-quarter earnings surprise of 4.6%, on average. The Zacks Consensus Estimate for the company’s 2024 earnings has moved 0.2% north to $6.02 per share over the past 30 days.
HCA Healthcare is the largest non-governmental operator of acute care hospitals in the United States. These hospitals provide outpatient services, such as outpatient surgery, laboratory, radiology, respiratory therapy, cardiology and physical therapy. HCA currently carries a Zacks Rank #2.
HCA Healthcare has gained 14.3% over a year. It delivered a trailing four-quarter earnings surprise of 9.8%, on average. The Zacks Consensus Estimate for HCA’a 2024 earnings has moved 0.4% north to $20.58 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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Caterpillar Inc. (CAT) : Free Stock Analysis Report
HCA Healthcare, Inc. (HCA) : Free Stock Analysis Report
Timken Company (The) (TKR) : Free Stock Analysis Report
Hubbell Inc (HUBB) : Free Stock Analysis Report
