For investors looking to balance the search for high-growth companies with some caution, the "Growth at a Reasonable Price" (GARP) method presents a solid middle path. This method tries to find companies with good growth paths but whose stock prices are not at extreme levels, steering clear of both deep-value and highly speculative growth investments. One way to use this method is by filtering for stocks with good fundamental growth marks, along with satisfactory ratings for profitability and financial condition, while making sure the stock price is still sensible. This "affordable growth" filter looks for chances where the company's future is not already completely, or overly, reflected in its current market price.
ALNYLAM PHARMACEUTICALS INC (NASDAQ:ALNY), a biopharmaceutical company that leads in RNA interference (RNAi) therapeutics, recently came up from such a filter. According to its fundamental analysis report, the company gets an overall rating of 6 out of 10, but its individual scores show a picture that fits well with the affordable growth idea. The heart of the method depends on good growth combined with a fair stock price, and Alnylam's report shows these parts clearly.
A Notable Growth Picture
The most striking part of Alnylam's current fundamentals is its very good growth, which is important for any GARP investment. The company's Growth Rating is a high 8 out of 10, backed by strong performance numbers.
- Strong Recent Growth: In the last year, Alnylam's Earnings Per Share increased by 119.47%, while Revenue increased by 53.24%. This shows the successful commercial growth of its products like AMVUTTRA, GIVLAARI, and OXLUMO.
- Good Historical Path: On average, revenue has increased by 59.21% each year over recent years, showing a continued and strong upward path.
- Solid Future Predictions: Analysts think this pace will keep going, with predicted yearly EPS growth of almost 73% and revenue growth averaging 34.81% in the next few years. This forward-looking strength is needed to support a growth-focused investment.
A Stock Price Consideration
While pure stock price measures can seem high, the GARP method focuses on a fair price compared to the growth available and similar companies. Alnylam's Valuation Rating of 5 shows this detailed view. The company's high Price-to-Earnings (P/E) ratio of 695 is costly by itself, but the situation matters.
- Value Compared to Industry: Compared to the biotechnology industry, Alnylam seems more fairly priced. Its P/E ratio is lower than nearly 89% of similar companies. Also, its Price/Forward Earnings ratio of 49.5 and Enterprise Value/EBITDA ratio are lower than over 90% of the industry.
- Growth Consideration: The filter looks for stocks that are "not overpriced," and this industry comparison is important. The stock price measures, when considered next to the company's leading growth rates and getting-better profitability, imply the market may not be completely accounting for the future growth possibility, making it "affordable" within its high-growth field.
Supporting Fundamentals: Profitability and Condition
For growth to be lasting and less risky, it must be backed by good profitability and a firm financial base. Alnylam's scores here are acceptable, meeting the filter's needs for "satisfactory" ratings.
- Reaching Profitability (Rating: 6): After years of operations focused on spending, Alnylam is now showing good basic profitability. Its Profit Margin (1.36%), Operating Margin (8.25%), and Return on Equity (18.63%) all place in the top part of its industry. This change from only spending cash to creating profitable growth is a notable positive change.
- Acceptable Financial Condition (Rating: 5): The company's financial condition shows a varied but workable picture. Its Altman-Z score shows no short-term bankruptcy danger, and it has good liquidity with a healthy Current Ratio. However, it has a high debt-to-equity ratio, a typical feature in biotech that needs much capital. The filter's need for a decent condition score is met, recognizing the company is financially stable enough to back its growth plans, though investors should watch the debt level.
Conclusion
Alnylam Pharmaceuticals shows the kind of company an affordable growth filter aims to find. It has a clear and strong growth driver, shown by excellent past performance and good future predictions. While its main stock price multiples are high, they are fair, even interesting, when viewed within the high-growth biotechnology field and measured against its growth picture. The supporting fundamentals of improving profitability and acceptable financial condition suggest this growth is becoming more lasting. For an investor using a GARP method, ALNY represents a possibility where the price paid today may give a fair starting point for the notable growth expected later.
This review of ALNYLAM PHARMACEUTICALS INC came from a specific fundamental filtering method. You can find more stocks that match this "Affordable Growth" picture by looking at the pre-set filter here.
Disclaimer: This article is for information only and does not make up financial advice, a suggestion to buy or sell any security, or a support of any investment method. Investors should do their own study and think about their personal financial situation and risk comfort before making any investment choices.
