GARP -
Growth at a
Reasonable Price. An investment discipline that looks for companies at an attractive price (often undervalued) with strong projected
earnings. By combining the
value discipline (undervalued
stocks) with the
growth discipline (growth at a rate greater than the
market or index), GARP seeks to give
investors the
best of both worlds.
GARP investors look for stocks with P/E ratios (price to earnings ratios) lower than that of its industry. Lately, the GARP statistic of choice has been the PEG ration (P/E ratio to growth). If the PEG is less than one, its probably a stock a GARP investor would be interested in. However, because past performance is not necessarily indicative of future results , the PEG ratio can be somewhat misleading: if the projected growth at the time of its calculation doesn't pan out, the stock didn't really meet the GARP criteria of growth. Because of this, GARP investing, like all investing, can be risky business.