For investors looking for a mix of solid increase and fair cost, the Growth at a Reasonable Price (GARP) or "affordable growth" method presents a good option. This method tries to find companies that are increasing their earnings and sales faster than average but are also priced at levels that do not require flawless future results. It is a practice that tries to sidestep the danger of paying too much for extreme growth while still gaining from firms with good forward progress. By filtering for stocks with high growth scores, good basic profit and money strength, and a cost that is not extreme, investors can create a collection set up for lasting gains.
AUTODESK INC (NASDAQ:ADSK) stands out as a top pick from this kind of filter. The design software company's basic profile, as shown in its detailed study report, shows a firm that fits well with the affordable growth idea, getting a 7 out of 10 total. This score comes from clear positives in growth and profit, weighed against a fair cost and an adequate, though varied, money strength score.
Good and Lasting Growth Path
The center of any growth investment is a clear and lasting increase of the business. Autodesk does well here, getting a Growth score of 7. The company is posting strong results for both sales and profits, with speed likely to keep going.
- Past Results: Sales increased by 15.55% over the last year, continuing a multi-year average increase rate of 13.37%. More key, Earnings Per Share (EPS) has risen quickly, going up by 19.20% last year and by almost 25% each year on average over recent years.
- Future Outlook: Experts predict this strength will continue. Sales are expected to increase at about 13.10% each year in the near future, while EPS is predicted to rise by about 18.57% per year. This match between past and expected growth points to a business plan with lasting need, not a temporary jump.
For the affordable growth method, this steady double-digit increase in key measures is key. It gives the "growth" part without depending on uncertain, far-off predictions, forming a base of real business increase.
A Cost Compared
A stock can show excellent growth but still be a bad investment if the price is too steep. Autodesk's Cost score of 5 shows it is not low in simple terms, but it seems fairly priced next to its chances and similar firms—a main idea of GARP investing.
- Compared Cost: With a Price/Earnings (P/E) ratio of 25.62, ADSK costs more than 64% of its software industry peers, whose average P/E is above 35. Its Forward P/E of 21.41 is also more appealing than about two-thirds of the industry.
- Growth Payback: The PEG ratio, which changes the P/E for growth, shows a fair cost. This hints the current share price fairly matches the company's expected earnings increase rate. Also, measures like Enterprise Value to EBITDA and Price to Free Cash Flow show ADSK costs less than about 70% of its industry rivals.
This cost view is important. The method specifically filters for stocks that are "not overpriced," looking for a buffer. Autodesk's cost, while not low-value, is explained by its high-quality growth and profit when measured against both the wider market and its own field.
Basic Profit and Money Strength
Lasting growth must be built on a profitable and steady base. Autodesk's high Profit score of 9 highlights the efficiency of its work, a point that backs both its growth and explains its cost premium.
- High Margins: The company has top industry margins, including a Gross Margin over 90% and an Operating Margin of almost 24%, doing better than most software firms. Its Return on Invested Capital (ROIC) of 20.36% is very good and points to highly efficient use of money.
- Money Strength Points: The company's Strength score of 6 gives a detailed view. On the good side, Autodesk has a strong ability to pay with a low debt-to-free-cash-flow ratio and a good Altman-Z score, showing no failure risk. However, its low Current and Quick Ratios (both 0.82) are a seen issue for short-term cash, though the report places this next to the company's good cash creation and profit.
For an affordable growth filter, strong profit is required as it funds new investment and gives toughness. The adequate strength score, with its notes, meets the needs, showing the company is money-sound enough to follow its growth plans without too much debt.
End
Autodesk Inc. makes a good case for investors using an affordable growth method. The company shows the needed mix of strong, expected growth (score 7) and top industry profit (score 9), all while being traded at a cost (score 5) that is fair within its high-performing field. While investors should note the cash measures noted in the strength study, the total basic profile points to a company doing well with a proven software subscription model. It shows the GARP idea of paying a fair price for a quality business with clear growth paths.
Find Other Affordable Growth Picks The study of Autodesk came from a specific filter for stocks with good growth, adequate strength and profit, and fair costs. If this method fits your investment style, you can look at a new list of matching companies using the Affordable Growth stock filter.
Disclaimer: This article is for information only and does not make financial advice, a suggestion, or an offer or request to buy or sell any securities. The information given is based on supplied data and should not be the only base for any investment choice. Investors should do their own separate study and talk with a qualified financial advisor before making any investment.
