Amphenol Corp. (NYSE:APH) Emerges as a Prime Growth at a Reasonable Price (GARP) Candidate

For investors looking to balance the search for growth with some caution, the Growth at a Reasonable Price (GARP) method presents a solid middle path. This method tries to find companies that are increasing their earnings and revenue faster than normal, but whose stock prices are not too high. The aim is to steer clear of the speculative excitement that can surround fast-rising growth stocks while still joining in their progress. Searching for stocks with good fundamental growth marks, along with acceptable profitability, financial soundness, and a fair price, can help find these "affordable growth" possibilities. One stock that recently appeared from this kind of search is Amphenol Corp. Class A (NYSE:APH).

A Look at Fundamental Soundness

A full fundamental review of Amphenol, found in its full report, shows a company with a strong operational record. ChartMill gives APH a total fundamental score of 7 out of 10, pointing to a good base. The scores in five main areas show where the company is strong and where investors might see some points to watch.

• Profitability (Score: 9/10): This is Amphenol's highest area. The company shows very good returns on capital and increasing margins.
• Growth (Score: 8/10): The company is recording strong growth in both revenue and earnings, a key need for the GARP method.
• Health (Score: 6/10): Financial health is acceptable, with good solvency numbers, though there are small notes about share count and debt.
• Valuation (Score: 5/10): The price looks mixed, posing the main question for a GARP investor: is the cost fair for the growth available?
• Dividend (Score: 6/10): The company provides a small, steady dividend with a maintainable payout ratio, adding an income part often missing from pure growth stocks.

Growth Catalysts: The Fuel for GARP

The center of the GARP argument for Amphenol is its strong and speeding growth path, which gives it a high 8/10 score. The company is not just growing; it is doing so quickly.

• Strong Recent Results: In the last year, Amphenol recorded a 47.4% jump in revenue and a large 66.9% rise in earnings per share (EPS). This shows high demand and good turning of sales into profits.
• Steady Past Performance: Reviewing history, the company has built its revenue at a typical yearly rate of 13.1% and its EPS at 15.1% over recent years, showing this is not a single occurrence.
• Good Future Direction: Importantly for what comes next, experts think this strength will keep going. Revenue is predicted to grow close to 20% each year in the near future, with EPS growth expected at 18.7%. The report says that both revenue and earnings growth rates are getting faster, a very good sign for investors focused on growth.

This strong growth picture is exactly what the "affordable growth" search aims to find. Without good, clear growth, a stock cannot be a GARP pick, no matter how low its price seems.

Valuation: Judging the "Reasonable Price"

The valuation score of 5/10 gives a more detailed view and is the important screen in the GARP method. A quick look at standard measures might cause concern, but a closer review shows the setting given by the company's growth and quality.

• Apparently High Measures: Amphenol's Price-to-Earnings (P/E) ratio of 46.3 and Forward P/E of 32.6 are higher than wider S&P 500 averages. Alone, these numbers point to a premium price.
• Growth-Considered View: The main point for GARP investors is to price growth. Here, Amphenol's numbers become more interesting. Its Price/Earnings-to-Growth (PEG) ratio is said to be low, meaning the stock price could be fair when including the high expected earnings growth. The review clearly says, "APH's low PEG Ratio... points to a rather inexpensive price for the company."
• Industry and Quality Setting: Compared to similar companies in the Electronic Equipment, Instruments & Components industry, Amphenol's P/E matches the average, while its Price-to-Free-Cash-Flow ratio is actually less expensive than over 62% of the industry. Also, the report ends by saying the company's "excellent profitability score, which could support a higher PE ratio."

This mix of points—high growth, industry-relative price, and better profitability—backs the search's finding that Amphenol is "not priced too high while it is growing strongly."

Supporting Basics: Profitability and Health

For a GARP method to last, growth must not hurt financial steadiness or weak operations. Amphenol scores well here, giving a buffer for investors.

• Excellent Profitability: The 9/10 profitability score is a key strength. The company has a Return on Invested Capital (ROIC) of 19.9%, doing better than 93.6% of its industry, and a very good Operating Margin of 25.0%. High profitability like this often builds a competitive edge and gives the cash flow to fund future growth without needing too much debt.
• Sufficient Financial Health: The 6/10 health score indicates a mostly firm balance sheet with some small notes. Solvency is strong, with a very good Altman-Z score showing no bankruptcy danger and a sound Debt-to-Free-Cash-Flow ratio. Liquidity numbers are acceptable. The main watch points are a recent rise in the debt/assets ratio and an increase in shares outstanding, which investors may want to follow.

These supports of profitability and health are vital for the affordable growth search. They help make sure the found growth is of good quality and that the company has the financial strength to handle economic changes, making the "reasonable price" a safer choice.

Summary

Amphenol Corp. offers a solid example for the Growth at a Reasonable Price approach. It meets the requirements of a search that calls for strong growth (which it clearly has), fair valuation (when considered with growth and quality), and supporting basics of profitability and health. The company's strong recent results, together with predictions for continued faster-than-normal growth and top-level profitability, suggest it is performing well across its various markets in connectivity and sensors.

For investors wanting to look at other stocks that match this balanced picture of affordable growth, you can see the full rules and view more search results here.

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Disclaimer: This article is for information only and is not 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 reason for any investment choice. Investors should do their own research and talk with a qualified financial advisor before making any investment.