Add These 4 GARP Stocks To Your Portfolio For Better 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 should 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 indicates that the stocks are undervalued.)

These few criteria have narrowed down the universe of over 7,700 stocks to only four.

Here are four stocks that made it through the screen:

The Toro Company (NYSE:TTC) is a leading worldwide provider of innovative solutions for the outdoor environment, including turf, snow and ground engaging equipment and irrigation and outdoor lighting solutions. The company has an average four-quarter positive earnings surprise of 7.4% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks.

S&P Global, Inc. (NYSE:SPGI) is a provider of ratings, benchmarks, analytics and data to the capital and commodity markets. It has an average four-quarter positive earnings surprise of 11.1% and a Zacks Rank #2.

Broadridge Financial Solutions, Inc. (NYSE:BR) is a leading global provider of technology-based outsourcing solutions to the financial services industry. It has an average four-quarter positive earnings surprise of 12.8% and a Zacks Rank #2.

Primerica, Inc. (NYSE:PRI) provides financial products and services. It assists its clients in meeting their needs for term life insurance, which it underwrites, and mutual funds, variable annuities and other financial products, which it distributes primarily on behalf of third parties. It has an average four-quarter positive earnings surprise of 1% and a Zacks Rank #2.

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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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S&P Global Inc. (SPGI): Free Stock Analysis Report

Primerica, Inc. (PRI): Free Stock Analysis Report

Toro Company (The) (TTC): Free Stock Analysis Report

Broadridge Financial Solutions, Inc. (BR): Free Stock Analysis Report

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Zacks Investment Research