For investors looking to balance the search for growth with a degree of caution, the "Growth at a Reasonable Price" (GARP) method provides a practical middle path. This method looks for companies with steady and good earnings increase, but whose stock prices are not at the high levels often seen with aggressive growth stocks. The aim is to sidestep both the slow progress of deep value investments and the risky excitement of overly promoted growth stocks, focusing instead on businesses where the growth story is backed by sound basics and an acceptable stock price. One stock that recently appeared in a quantitative filter for such "affordable growth" traits is Boot Barn Holdings Inc (NYSE:BOOT).
A Look at Steady Increase
Boot Barn functions as a top lifestyle seller of western and work-related footwear, clothing, and gear. With a rising number of about 475 stores in 49 states and a strong online sales operation, the company has effectively used its specialized market. The basic attraction for a GARP method is its shown capacity to turn this growth into clear financial progress, an important first step for this investment approach.
Growth: The Main Factor
The company's growth measurements are a major reason it meets the first filter. Boot Barn has not only posted notable recent outcomes but has also built a history of good expansion.
- Past Results: In the last year, Revenue increased by 17.82% and Earnings Per Share (EPS) rose by an even stronger 35.74%. The longer-term averages are also notable, with Revenue increasing at 17.71% and EPS at 28.69% per year.
- Future Predictions: While analysts expect some slowing from these high rates, the forward view stays positive. Revenue is predicted to grow by an average of 11.13% per year, with EPS forecast to rise by 13.54%. This mix of a good past record and a positive forward growth path is key for the GARP model, which looks for lasting growth instead of temporary jumps.
Valuation: Judging the "Acceptable Price"
A stock cannot be seen as "affordable growth" if its price already accounts for many years of future gains. Boot Barn's valuation shows a varied but finally acceptable view, particularly when compared.
- Simple Compared Measurements: With a Price/Earnings (P/E) ratio of 25.49, the stock is not low-priced by itself. However, measured against others in the Specialty Retail field, the valuation seems more appealing. Boot Barn is less expensive than about 66% of its industry rivals based on this measurement. Its Forward P/E of 20.57 also stacks up well next to the wider S&P 500 average.
- The Growth Adjustment: The most informative measurement for a GARP review is frequently the PEG ratio, which modifies the P/E for predicted earnings growth. Boot Barn's low PEG ratio shows the market may not be fully accounting for its future growth possibility, an important sign for this method. The review indicates the current valuation is acceptable considering the company's excellent profit generation and predicted growth rate.
Supporting Basics: Condition and Earnings
For growth to be lasting and the valuation to be fair, a company must rest on a firm base. Boot Barn performs well on these supporting points, which are part of a careful GARP filter.
- Earnings Quality: The company receives a high profitability grade (8 out of 10). Important margins are top in the industry, with a Profit Margin of 10.05% and an Operating Margin of 13.32%, each doing better than about 90% of industry peers. These margins have also been getting better over time, showing efficient scaling and pricing ability.
- Financial Condition: Boot Barn holds a good financial condition score (7 out of 10). The balance sheet is generally strong, showing a very low Debt/Equity ratio of 0.01 and a good Altman-Z score, pointing to low bankruptcy danger. It is important to note a lower Quick Ratio, which indicates a dependence on inventory control, but overall financial strength measurements are very good. This financial steadiness lowers the risk linked to investing in a growth company.
Summary and Next Steps
Boot Barn Holdings Inc shows an example of the affordable growth model. It pairs clear, good growth in both sales and earnings with a valuation that, while not deep value, is acceptable compared to its industry and future expectations. This is further supported by high-quality earnings and a sound balance sheet, which back the durability of its growth. For investors using a GARP system, these are exactly the traits that help filter for companies where growth is not being bought at a cost that allows no room for setbacks.
A full fundamental review report for Boot Barn, which details these grades and measurements, can be seen here.
Find Other Possible Choices Boot Barn was found using a specific "Affordable Growth" filter made to locate stocks with good growth, acceptable valuations, and solid basics. If this investment approach fits your plan, you can examine the filter and see other stocks that currently match similar conditions by clicking here.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer or solicitation to buy or sell any securities. The analysis is based on data and ratings provided by ChartMill.com. Investors should conduct their own independent research and consider their individual financial circumstances and risk tolerance before making any investment decisions.
