For investors looking to balance the search for growth with some caution, the Growth at a Reasonable Price (GARP) method presents a notable middle path. This method looks for companies with good and lasting growth, but steers clear of those with very high prices that usually come with top performers. The aim is to locate firms where the growth path is not completely shown in the present stock price, possibly giving a better balance of risk and reward. One way to find these opportunities is by using a structured filter for "affordable growth," which selects stocks with high growth scores, good basic profit and money strength, and a price that does not seem too high.
AngloGold Ashanti PLC (NYSE:AU), a worldwide gold mining company with varied activities across four continents, recently appeared from such a filter. According to a basic review report from ChartMill, the company gets a total basic score of 8 out of 10, putting it in good position in the Metals & Mining field. This score comes from good marks across the five main parts of the review: Growth (8), Valuation (7), Money Strength (7), and Profit (9). This mix points to a company that is not only getting bigger but doing so from a place of stability and at a cost that may not completely show its possibilities.
A Detailed View of Growth and Valuation
The center of the GARP idea for AngloGold Ashanti is found where its growth measures and present price meet. The company's growth picture is especially good, backed by both recent results and what is expected next.
- Strong Recent Growth: The company has shown forceful business speed. Over the last year, Earnings Per Share (EPS) rose by a notable 517.47%, while Revenue increased by 26.43%. This is not just a single-year event; the five-year average yearly growth rates for EPS and Revenue are a firm 16.81% and 10.45%, in that order.
- Good Future View: Experts think this growth will keep going, though at a more maintainable rate. Revenue is estimated to grow by 13.47% each year in the next period, with EPS thought to rise by 14.97% on average.
This growth account is met with a price that the review indicates is fair, particularly inside its field. While the normal Price-to-Earnings (P/E) number of 25.69 might look high alone, the full picture is key.
- Field Price Difference: Measured against others in its field, AU looks priced low. Its P/E number costs less than about 80% of the companies in the Metals & Mining field, which has an average P/E above 40.
- Future-Focused Measures Are More Interesting: The price view gets more appealing when looking ahead. The Price/Forward Earnings number of 12.31 is seen as a "proper price" for the company and costs less than over 82% of field peers. This forward number is also much lower than the S&P 500 average.
- Growth Adjustment: The review states that AU's low PEG number, which changes the P/E for growth, shows a "quite low price." This directly backs the GARP method, as it hints the market may not be completely costing in the company's expected earnings growth.
The Backing Parts: Profit and Money Strength
Lasting growth at a fair price cannot be without a stable basic business. AngloGold Ashanti's high profit and firm money strength scores give important support for the investment idea, lowering risk and confirming the quality of its growth.
Profit is a leading area for the company, with a score of 9. The review points out outstanding returns on money put in, with a Return on Invested Capital (ROIC) of 23.07%, doing better than 97% of its field. Also, its profit margin of 24.58% and operating margin of 37.97% sit in the top group of the mining field. These are not fixed numbers; the report notes that all main margins have gotten better noticeably in recent years, hinting at capable management and operational effectiveness.
Money Strength, scored a 7, shows a company with a solid financial position. Main details include:
- A good Altman-Z score of 7.19, showing a very small short-term risk of failure.
- A very good Debt-to-Free-Cash-Flow number of 0.92, meaning the company could in theory pay all its debt with under one year of its cash flow.
- A sound Debt/Equity number of 0.28 and an adequate Current Ratio of 2.58, showing good cash availability and a balanced money setup.
These details are necessary for the affordable growth method. High profit suggests the growth is making real economic value, while firm money strength gives the toughness to handle field changes and keep putting money into future growth without taking on too much debt.
Summary
AngloGold Ashanti shows a situation that fits with the ideas of searching for affordable growth. The company is in a time of important earnings and revenue increase, with experts predicting this direction to continue. Importantly, this growth is backed by top-level profit and a firm financial position. When seen through the view of its field and future earnings, its price does not look too high, possibly giving a starting point for investors who think the market has not yet completely recognized the company's path.
For investors wanting to look at other companies that match this picture of good growth, fair price, and firm basics, more results can be seen by checking the Affordable Growth stock filter on ChartMill.
Notice: This article is for information only and is not money 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 skilled money advisor before making any investment choices. The basic review mentioned is given by ChartMill and can be seen in full here.