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If you are looking for a profitable portfolio of stocks offering the best of value and growth investing, try the growth at a reasonable price or GARP strategy.
The strategy helps investors gain exposure to undervalued stocks with impressive prospects. Unlike a blend strategy, a portfolio that uses GARP investing is expected to include stocks that offer the best value and growth investing. HCA Healthcare HCA, National Fuel Gas Company NFG and BGC Group, Inc. BGC are some GARP stocks that hold promise.
GARP Metrics: Mix of Growth & Value Metrics
The GARP strategy seeks to offer an ideal investment by utilizing the best features of value and growth investing. Investors adopting the GARP approach prefer buying stocks 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.
Growth Metrics
A strong earnings growth history and impressive earnings prospects are the main concepts that GARP investors borrow from the growth investing strategy. However, instead of super-normal growth rates, pursuing stocks with a more stable and reasonable growth rate is a tactic of GARP investors. Hence, growth rates between 10% and 20% are considered ideal under the GARP strategy.
Another metric that growth and GARP investors consider is the return on equity (ROE). GARP investors look for a strong and higher ROE than the industry average to identify superior stocks. Stocks with positive cash flows find precedence under the GARP plan.
Value Metrics
GARP investing prioritizes the popular value metrics — the price-to-earnings (P/E) and price-to-book (P/B) ratios. Though this investing style picks stocks with higher P/E ratios than value investors, it avoids companies with extremely high P/E ratios.
Using the GARP principle, we ran 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 Zacks Rank #1 (Strong Buy) or 2 (Buy).
Last 5-year EPS & projected 3-5-year EPS growth rates between 10% and 25% (Strong EPS growth history and prospects ensure improving business.)
ROE (over the past 12 months) greater than the industry average (Higher ROE than the industry average indicates superior stocks.)
P/E and P/B ratios less than the M-industry average (P/E and P/B ratios less than that of the industry indicate that the stocks are undervalued.)
Here are the three stocks that made it through the screening process:
HCA Healthcare is the largest non-governmental operator of acute care hospitals in the United States. It operates hospitals and related healthcare entities. At the end of 2024, the company operated 190 hospitals and approximately 2,400 ambulatory sites of care, including surgery centers, freestanding emergency rooms, urgent care centers and physician clinics, in 20 states and the United Kingdom.
HCA Healthcare’s revenues have been seeing an uptick on the back of growth in admissions and inpatient surgeries. The resumption of deferred elective procedures is likely to sustain the trend. Revenues are anticipated to be between $72.8 billion and $75.8 billion in 2025, the midpoint of which indicates a 5.2% rise from the 2024 figure. Multiple buyouts aided in increasing patient volumes and added hospitals to the portfolio. The company is benefiting from its telemedicine business line. Its operating cash flows rose 11.5% year over year in 2024. The company resorts to prudent capital deployment via share buybacks and dividend payments.
This Zacks Rank #1 stock has gained 6.7% in the past year. It has a trailing four-quarter earnings surprise of 5.86%, on average. The Zacks Consensus Estimate for HCA’s 2025 earnings has remained steady at $24.98 per share over the past 30 days. You can see the complete list of today's Zacks #1 Rank stocks here.
National Fuel Gas Company is an integrated energy company with natural gas assets located in the prolific Appalachian basin and oil-producing assets in California. The company operates through the following segments, namely Exploration and Production and Other, Pipeline and Storage and Gathering, and Utility and Energy Marketing.
National Fuel Gas' systematic investments should strengthen its operations and reduce greenhouse gas emissions. Strong liquidity should allow it to meet debt obligations. The company's steady process of replacing and modernizing the existing pipelines should further boost earnings. The company also acquired Shell’s assets, which should further boost its top-line performance.
This Zacks Rank #1 stock has surged 51% in the past year. It has a trailing four-quarter earnings surprise of 8.27%, on average. The Zacks Consensus Estimate for NFG’s fiscal 2025 earnings has moved south by 0.9% to $6.78 per share over the past 30 days.
BGC Group Inc. is a brokerage and financial technology company. Through its various affiliates, it specializes in the brokerage of a broad range of products, including Fixed Income, Foreign Exchange, Equities, Energy and Commodities, Shipping and Futures.
The company recently completed the acquisition of OTC Global Holdings, LP, one of the fastest-growing energy and commodities brokerage firms. The OTC Global deal will likely provide highly complementary synergies by combining related energy and ship-broking teams. This collaboration will enhance market knowledge, generate unique trade ideas and drive deeper insights for more strategic decision-making. BGC Group is well-positioned to capitalize on growing environmental and energy transition trends and will keep benefiting from consistent global demand for oil, the single largest source of energy. As such, the company’s top-line growth is anticipated to be impressive.
This Zacks Rank #1 stock has a trailing four-quarter earnings surprise of 3.26%, on average. The Zacks Consensus Estimate for BGC Group’s 2025 earnings has remained steady at $1.16 per share over the past 30 days.
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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.