Boot Barn Holdings Inc (NYSE:BOOT) Fits Peter Lynch’s Growth at a Reasonable Price (GARP) Strategy

Peter Lynch’s investment strategy centers on finding companies with steady growth at fair prices, often called the Growth at a Reasonable Price (GARP) method. By blending aspects of growth and value investing, Lynch looked for businesses with consistent earnings growth, strong financials, and low debt, all while trading at valuations that don’t overestimate future prospects. His approach relies on key metrics like the PEG ratio (Price/Earnings to Growth), Return on Equity (ROE), and modest debt levels to exclude overvalued or financially weak companies.

Boot Barn Holdings Inc (NYSE:BOOT) stands out as a potential fit for Lynch’s criteria. Here’s why:

Key Metrics Matching Peter Lynch’s Standards

• Consistent Earnings Growth: BOOT has achieved a 5-year EPS growth rate of 28.69%, fitting within Lynch’s ideal range of 15% to 30%. This shows steady, balanced growth, a trait of companies that can sustain progress without overreaching.
• Fair Valuation via PEG Ratio: The PEG ratio (Past 5 years) is 0.996, below Lynch’s benchmark of 1. This implies the stock is priced fairly compared to its historical growth, a critical factor in avoiding overpriced growth stocks.
• High Profitability (ROE): With an ROE of 16.01%, BOOT surpasses Lynch’s 15% minimum, demonstrating effective use of shareholder equity to produce earnings.
• Low Debt Levels: A Debt/Equity ratio of 0.012 is significantly under Lynch’s 0.6 cap (and his preference for below 0.25), indicating little dependence on borrowing for growth.
• Solid Liquidity: A Current Ratio of 2.45 shows strong short-term financial health, another priority for Lynch to withstand market challenges.

Core Strengths and Points to Note

Boot Barn’s fundamental report reveals further positives:

• Profitability: High margins (9.47% net, 12.53% operating) rank BOOT among the top in its specialty retail sector.
• Growth Path: Revenue has grown at a 17.71% annual rate over 5 years, with analysts predicting continued double-digit EPS and sales growth.
• Financial Stability: A strong Altman-Z score (5.73) and minimal debt highlight sound financial footing.

However, valuation measures like a P/E of 28.57 suggest the stock isn’t inexpensive, though this is balanced by its growth outlook and industry-standard multiples.

Why These Metrics Are Important for GARP Investors

Lynch’s strategy steers clear of risky growth stocks by requiring fair valuations (PEG ≤1) and sustainable growth (15–30% EPS growth). BOOT’s metrics reflect this balance: its growth is strong but not excessive, and its PEG ratio indicates the market hasn’t overvalued its potential. The low debt and high ROE further lower risk, matching Lynch’s focus on financially stable businesses.

For investors searching for similar opportunities, the Peter Lynch screen provides a selected list of stocks meeting these standards.

Disclaimer: This analysis is not investment advice. Perform your own research or consult a financial advisor before making decisions.