For investors looking for growth without high cost, the "Growth at a Reasonable Price" (GARP) method gives a measured path. It tries to find companies with good and lasting growth potential, but whose shares are not priced at high levels. This process often looks for stocks with solid growth measures, firm profitability, and good finances, while making sure the price does not already assume too much future success. One stock that recently appeared through such a moderate growth screen is Alnylam Pharmaceuticals Inc (NASDAQ:ALNY).
The screen, which selects for a high growth rating, acceptable scores in profitability and financial condition, and a moderate valuation, marked Alnylam as a candidate for more examination. A check of the company's fundamental analysis report shows the particular positives and points that fit this investment idea.
Strong Growth Path
The center of any GARP investment is convincing growth, and Alnylam’s profile is notably good in this part. The company’s growth rating of 8 out of 10 comes from outstanding results both in the past and in estimates for what is ahead.
- High Recent Growth: Over the last year, the company reported a 119.47% rise in Earnings Per Share (EPS) and a 53.24% gain in Revenue. This shows its commercial products are getting notable market acceptance.
- Continued Momentum: Reviewing the last several years, Alnylam has reached an average yearly revenue growth of 59.21%, indicating a steady and strong increase of its business.
- Good Future Estimates: Analysts expect this momentum to keep going, with predictions for average yearly EPS growth of almost 70% and revenue growth of more than 33% in the next years. This forward-looking strength is key for supporting an investment in a growth-focused biopharma company.
A Moderate Valuation Setting
A main rule of the moderate growth method is to not pay too much for future possibility. Alnylam’s valuation rating of 5 implies it is not inexpensive in simple terms, but seems fairly priced compared to its industry and growth profile.
- Industry-Relative Price: While Alnylam’s Price/Earnings (P/E) ratio is high on a simple basis, it is viewed as less expensive than nearly 89% of its biotechnology industry group. Also, its Price/Forward Earnings and Enterprise Value/EBITDA ratios are more appealing than most companies in its field.
- Growth Justification: The screen’s need for a valuation score above 5 helps remove stocks where the price has increased too much compared to actual results. For Alnylam, the very high expected earnings growth rate gives a reason for its current valuation multiples, a balance the GARP method looks for.
Supporting Basics: Profitability and Condition
For growth to be lasting, it needs to be backed by a profitable business model and a stable financial base. Alnylam’s scores of 6 in Profitability and 5 in Financial Condition show a company changing, with clear positives and parts to note.
Profitability Positives: The company has recently started to become profitable. Its margins are a strong point:
- Gross Margin of 83.9%
- Operating Margin of 8.25%
- Profit Margin of 1.36% These margins are in the better part of the biotechnology industry, showing the company has control over pricing and is moving toward effective operations as its revenue grows.
Financial Condition Notes: The financial condition score suggests a varied situation, which is typical for commercial-stage biotech companies spending much on growth.
- Good Signs: The company has a sound Altman-Z score, showing low short-term bankruptcy risk, and its liquidity ratios indicate it can easily meet near-term needs.
- Parts to Develop: The company holds a notable amount of debt, seen in a high Debt/Equity ratio. While this is not unusual for the capital-heavy biotech field and is often used to support growth, it is a detail investors must note as interest rates change.
Conclusion
Alnylam Pharmaceuticals offers an example in the moderate growth screening method. It shows the high, well-backed growth that growth investors want, yet its valuation, while not small, is seen as fair within its high-growth industry. The company’s very good margins and recent move to profitability give a base for its increase, though its debt-heavy balance sheet needs notice. For investors using a GARP method, Alnylam stands for the kind of company where strong future possibilities may not be completely counted in the present share price.
This review of Alnylam came from a specific moderate growth screen. Investors curious about finding other companies that meet similar standards of strong growth, fair valuation, and acceptable basics can see more possible choices by viewing the full screen results here.
Disclaimer: This article is for information only and does not make financial advice, a suggestion to buy or sell any security, or a support of any investment plan. Investors should do their own study and talk with a qualified financial advisor before making any investment choices.
