5 Top GARP Picks for Your Portfolio Based on PEG Ratio

Core Insights - The article discusses the effectiveness of the GARP (Growth at a Reasonable Price) investment strategy, which combines elements of both value and growth investing to identify stocks with solid growth potential while being undervalued [1][3]. Group 1: GARP Strategy - GARP investing prioritizes the PEG (Price/Earnings Growth) ratio, which relates a stock's P/E ratio to its future earnings growth rate, helping to identify stocks with both undervaluation and future growth potential [3]. - A lower PEG ratio, ideally below 1, is preferred for GARP investors, indicating a favorable balance of price and growth expectations [3]. - The article highlights that the PEG ratio is often overlooked due to the difficulty in estimating future earnings growth rates [4]. Group 2: Screening Criteria - Effective GARP investing involves several screening criteria, including a PEG ratio less than the industry median, a P/E ratio below the industry median, and a Zacks Rank of 1 (Strong Buy) or 2 (Buy) [4]. - Additional criteria include a market capitalization greater than $1 billion, an average 20-day trading volume exceeding 50,000, and a percentage change in F1 earnings estimate revisions greater than 5% [5]. Group 3: Stock Examples - Dropbox (DBX) serves over 700 million registered users globally and has a Zacks Rank of 1 with a Value Score of B, alongside a long-term expected growth rate of 11.4% [5][6]. - Haemonetics (HAE) provides blood management solutions and has a Zacks Rank of 2 with a Value Score of B, featuring a long-term expected growth rate of 12% [6]. - PDD Holdings Inc. (PDD) benefits from increased revenues in online marketing and has a Zacks Rank of 1 with a Value Score of B, boasting a long-term expected growth rate of 50.3% [7]. - B2Gold Corp. (BTG) is a gold producer with a Zacks Rank of 2 and a Value Score of A, showing a growth rate of 23.5% over the next five years [7]. - Adtalem Global Education Inc. (ATGE) is a healthcare education provider with a Zacks Rank of 1 and a Value Score of A, along with a long-term expected growth rate of 15% [8].