For investors looking to balance the search for growth with a degree of caution, the "Growth at a Reasonable Price" (GARP) method presents a noteworthy middle path. This technique seeks to find companies that are increasing their earnings and revenues at a good rate, but whose stock prices are not at extreme levels. It is a way that sidesteps the speculative excitement common around fast-rising growth stocks and also avoids value traps, companies that are inexpensive for a clear cause. One instrument for using this method is an "Affordable Growth" stock filter, which selects for companies with good growth basics, sound financial condition and earnings, and a price that does not seem too high. A recent notable result from this filter is Anglogold Ashanti PLC (NYSE:AU).
A Close Look at the Fundamental Report
A detailed fundamental review for Anglogold Ashanti shows a solid total score of 8 out of 10, placing it well within the Metals & Mining field. This score is supported by good results across the five main sections examined: Growth, Valuation, Health, Profitability, and Dividend. For a GARP investor, the relationship between the Growth and Valuation scores is especially important, and AU receives an 8 in each section.
Good Growth Path
The company's growth story is a main reason for its selection. The review points out notable speed, particularly in the last year, along with predictions for ongoing increase.
- Strong Recent Earnings: Earnings Per Share (EPS) rose by a remarkable 517.47% over the past year.
- Steady Historical Growth: Over several years, AU has shown dependable growth with EPS rising at an average yearly pace of 16.81% and Revenue increasing at 10.45% per year.
- Good Future View: Experts forecast this growth to persist, with EPS likely to grow almost 15% each year and Revenue expected to rise to over 13% yearly growth in the next few years.
This mix of good past results and a positive future view is precisely what growth-focused investors want. It shows the company is not just gaining from a short-term jump but is on a lasting path of increase.
Appealing Price Measures
While growth is necessary, paying a fair price for it is the central idea of the GARP approach. AU's valuation score of 8 implies the market may not be completely valuing its growth possibility, offering a potential opening.
- Field Comparison: Despite a P/E ratio of 20.59, AU is priced lower than 85% of similar companies in its field, where the average P/E is above 34.
- Future Price Discount: The view is more interesting looking forward. With a Price/Forward Earnings ratio of 10.86, AU is less expensive than 82% of its field and trades at a notable difference from the S&P 500's average forward P/E of 24.01.
- Growth Adjustment: The review states that AU's low PEG ratio, which modifies the P/E for growth, signals a "rather low price." This is an important measure for GARP methods, as it directly connects the price paid to the growth rate received.
Supporting Basics: Profitability and Health
An affordable growth stock must be more than just low-priced and growing; it requires a stable base. AU's high scores in Profitability (8) and Financial Health (7) offer that important support, reducing risk for investors.
The company's earnings ability is a notable feature, with profit margins that are high in its sector. Its Return on Invested Capital (ROIC) of 23.07% is better than 97% of similar companies and is above its cost of capital, meaning it is effectively building value. Financially, the company is in sound condition. It has a good Altman-Z score pointing to low failure risk, and very importantly, its debt amount is very controllable. The Debt to Free Cash Flow ratio of 0.92 is very good, implying it could settle all its debts in under a year using its present cash flow. This financial soundness offers stability and room to fund future growth without taking on too much debt.
A Subject for More Study
Anglogold Ashanti PLC offers a noteworthy example for the Growth at a Reasonable Price framework. It displays the necessary characteristics: energetic and predicted continued growth in earnings and sales, a price that seems moderate compared to both its field and its own growth outlook, and the basic financial soundness and earnings ability to back its goals. The company's fundamental review highlights this balanced picture, making it a stock deserving of more detailed review for investors using such a method.
For investors wanting to find other companies that match this description of affordable growth, you can review more results using the Affordable Growth stock screener.
Disclaimer: This article is for information only and is not financial guidance, a suggestion to buy or sell any security, or a support of any investment plan. Investors should perform their own study and think about their personal financial situation and risk comfort before making any investment choices. The fundamental data and scores mentioned are based on past and forecasted numbers, which can change.
