It is not the fastest growth that wins, but the steadiest at a fair price: GARP avoids deep-value risks and valuation bubbles alike.
Save the strategy and StockScorer checks its rules for you every day. You'll get a heads-up whenever a stock crosses the upper or lower score threshold.
Once enough history is available, the backtest chart for this strategy will appear here.
Every stock runs through the same disclosed rules. The points add up to a score, traceable down to the individual rule.
Each rule checks a metric against a threshold, for example ROE above 15 %.
You decide how much each rule counts: from +1 to +3 or −1 to −3.
The sum is the score. Above the upper threshold: a high match with the profile.
These terms describe only the match with the criteria, not a recommendation to buy or sell.
10 to 25% per year over five years: the stability band earns the highest single score (+2).
The current P/E is measured against its own 5-year average, not against the market.
A return on equity above 15% ensures the growth is generated profitably.
PEG between 0.5 and 1.2; above that growth gets too expensive, extremely low values are suspicious.
For long-term investors seeking the compromise: more dynamism than classic dividend stocks, less risk than hyper-growth. GARP stocks are rarely spectacular. That is exactly the idea.
GARP (growth at a reasonable price) is the middle path between the extremes: deep value buys cheap and risks structurally sick companies; pure growth buys dynamism and risks valuation bubbles. The balanced GARP model demands both in moderation: steady earnings growth of 10 to 25% per year (fast enough for real compounding, slow enough to be sustainable), a P/E below its own 5-year average and a PEG in the fair window. Extremely low PEGs are deliberately not rewarded: they often point to cyclical earnings peaks whose growth will not repeat.
Four building blocks form the score: earnings growth of 10 to 25% per year (5-year CAGR) earns +2. The stability band is deliberately the highest single score. A current P/E below its own 5-year average earns +1, a return on equity above 15% another +1, and a PEG between 0.5 and 1.2 one more point.
On the deduction side: declining or unstable earnings growth (negative 5-year trend, missing history or a recently fallen profit) costs one point, as does a PEG above 2 (or without a meaningful value). The upper threshold is 3 points for large caps and 4 for mid and small caps.
Historical valuation: current P/E below its own 5-year average (+1).
Earnings stability: 5-year CAGR between 10 and 25% (+2); negative trend, missing history or recently declining earnings (−1).
Profitability: return on equity above 15% (+1).
Valuation: PEG 0.5–1.2 (+1); PEG above 2, negative or missing (−1).
The difference to the PEG strategy lies in the treatment of extremes: a PEG of 0.3 gets full points there, but deliberately no bonus here. Absurdly low PEGs frequently occur in commodity and cyclical stocks at the end of a boom cycle, when the seemingly high growth is about to tip over.
Documented deviation: the original criterion "EPS growth between 10 and 25% in every single year" cannot be mapped directly with annual data. StockScorer uses the 5-year CAGR band and adds a deduction when the most recent annual profit declined: together a good approximation of "steady rather than erratic".
For patient quality investors who want growth without paying for hope stocks, as a core strategy for the long-term portfolio.