AppLovin Corp (NASDAQ:APP) Identified as a Top Affordable Growth Stock

AppLovin Corp-Class A (NASDAQ:APP) has been identified as a potential candidate for investors looking for expansion at a sensible price, using a screening method that highlights solid expansion metrics, good profitability and financial condition, alongside acceptable valuation. This method, often called Affordable Growth or Growth at a Reasonable Price (GARP), tries to balance the search for high-expansion companies with the discipline of steering clear of overpriced stocks, which may lower risk while gaining upside from growth.

The fundamental analysis report for AppLovin, available here, gives an overall rating of 7 out of 10, showing good underlying qualities. Expansion is a notable feature, with a rating of 9. The company has shown impressive speed, with revenue rising by 34.33% over the past year and earnings per share jumping by 222.98%. Looking ahead, analysts forecast continued solid expansion, with average annual EPS growth estimated at 31.97% and revenue growth at 23.97%. This strong past and projected expansion is a central part of the affordable growth method, as it supplies the basic engine for possible stock gains.

Valuation is frequently a concern for expansion stocks, but AppLovin shows a more moderate view with a valuation rating of 5. While its trailing P/E ratio of 61.84 seems high next to the wider S&P 500, this must be viewed next to its exceptional growth speed and high profitability. More significantly, its forward P/E ratio of 34.86 is more consistent with industry competitors, and its PEG ratio, which includes earnings growth, indicates the stock could be sensibly priced considering its growth path. The method specifically looks for valuation scores above 5 to prevent extremely overvalued assets, and AppLovin meets this mark, suggesting its price may be acceptable given its expansion outlook.

Beyond expansion and valuation, the company shows outstanding strength in profitability, scoring a 9. It has a notable return on invested capital of 47.95%, doing better than almost 99% of its software industry competitors, and keeps very good profit margins above 45%. High profitability is vital for the affordable growth method because it shows the company can effectively turn revenue into earnings, backing lasting growth without too much outside funding. Financial condition is also solid with a score of 8, emphasized by a strong Altman-Z score indicating low bankruptcy risk and good liquidity ratios confirming it can handle short-term responsibilities. A good financial base lowers the risk level for expansion investors, as it implies the company is in a good position to handle economic changes and put money into future chances.

For investors curious about finding other companies that match this profile of solid expansion, acceptable valuation, and good fundamentals, more results can be located using this Affordable Growth stock screen.

Disclaimer: This article is for informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any securities. Investors should conduct their own research and consider their individual financial circumstances before making any investment decisions.