For Immediate Release
Chicago, IL – May 08, 2017 - Stocks in this week’s article include East West Bancorp Inc. (NASDAQ: EWBC – Free Report ), Microchip Technology Inc. (NASDAQ: MCHP – Free Report ), Primerica Inc. (NYSE: PRI – Free Report ) and Hasbro Inc. (NASDAQ: HAS – Free Report ).
Screen of the Week of Zacks Investment Research:
4 GARP Stocks for Significant Returns
Investors on the lookout for stocks that have the potential to offer the best growth as well as value investing may consider the growth at a reasonable price or GARP strategy.
This well-liked strategy helps investors gain exposure to stocks that have impressive growth prospects but are trading at a discount. Unlike the blend strategy, a portfolio created on the GARP way of investing is expected to help find stocks that offer the best of both value and growth investing.
GARP Metrics – Mix of Growth & Value
The GARP approach prefers stocks that are 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
Both 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 also a tactic of GARP investors. Hence, growth rates between 10% and 20% are considered ideal under the GARP strategy.
Another growth metric that is considered by both growth and GARP investors is return on equity (ROE). GARP investors look for strong and higher ROE compared to the industry average to identify superior stocks. Moreover, stocks with positive cash flow find precedence under the GARP plan.
Value Metrics
GARP investing gives priority to one of the popular value metrics – price-to-earnings (P/E) ratio. Though this investing style picks stocks with higher P/E ratios compared to value investors, it avoids companies with extremely high P/E ratios. Moreover, the price-to-book value (P/B) ratio is another value metric that is considered.
Using the GARP principle, we have run 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 favorable Zacks Rank #1 (Strong Buy) or 2 (Buy) to make the strategy foolproof.
Zacks Rank less than or equal to #2 (Only Strong Buy and Buy-rated stocks can get through.)
Last 5-year EPS & projected 3–5 year EPS growth rates between 10% and 20% (Strong EPS growth history and prospects ensure improving business.)
ROE (over the past 12 months) greater than the industry average (Higher ROE compared to the industry average indicates superior stocks.)
P/E and P/B ratios less than M-industry average (P/E and P/B ratios less than that of the industry indicates that the stocks are undervalued.)
These few criteria have narrowed down the universe of over 7,700 stocks to only six.
Here are four stocks that made it through the screen:
Pasadena, CA-based East West Bancorp Inc. (NASDAQ: EWBC – Free Report ) is the holding company for East West Bank, East West Capital Trust I, East West Capital Trust II and Risk Services Inc. The company has an average four-quarter positive earnings surprise of 9.35% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here .
Microchip Technology Inc . (NASDAQ:MCHP – Free Report ) develops and manufactures specialized semiconductor products for a wide variety of embedded control applications. This Zacks Rank #2 company has an average four-quarter positive earnings surprise of 12.19%.
Georgia-based Primerica Inc. (NYSE: PRI – Free Report ) distributes financial products to middle income households in the U.S. and Canada. It has an average four-quarter positive earnings surprise of 5.61% and a Zacks Rank #2.
Pawtucket, RI-based Hasbro Inc. (NASDAQ: HAS – Free Report ) is engaged in the design, manufacture and marketing of games and toys. The company has a Zacks Rank #2 and an average four-quarter positive earnings surprise of 16.54%.
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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.
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East West Bancorp, Inc. (EWBC): Free Stock Analysis Report
Microchip Technology Incorporated (MCHP): Free Stock Analysis Report
Primerica, Inc. (PRI): Free Stock Analysis Report
Hasbro, Inc. (HAS): Free Stock Analysis Report
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