Recognizing Value Situations - Growth at a Reasonable Price (GARP)

Recognizing Value Situations - Growth at a Reasonable Price (GARP)


GARP is the mainstream scenario of reasonable market valuation - or undervaluation - of growth potential. Solid and improving fundamentals and supporting intangibles are key. As part of the assessment the value investor must ask how realistic are the growth projections, particularly over time, and whether the company takes a balanced approach to the business and fundamentals. In short, is the business a good business, capable of sustained growth, and selling at a reasonable price? Key words not to lose sight of are good, sustained, and reasonable.


Or is the business a bet on an extreme but temporary success in short-term margins, market share, revenue, or profit? The G in GARP must be sustainable, not based on a short-term blip, fad, acquisition, or worse, a wild hope. The business model and its perception in the marketplace must be solid and on the rise.


Stocks with a PEG ratio of 2 or less with other solid fudamentals are good candidates, but "GARP" is not a matter of ratios alone.


Select companies with solid fundamentals and strong growth prospects based on various factors to analyse, but beware the growth maybe far from a sure thing.

Also read:
Recognizing Value Situations
Recognizing Value Situations - Growth at a Reasonable Price
Recognizing Value Situations - The Fire Sale
Recognizing Value Situations - The Asset Play
Recognizing Value Situations - Growth Kickers
Recognizing Value Situations - Turning the Ship Around
Recognizing Value Situations - Cyclical Plays
Recognizing Value Situations - Smoke and Mirrors