For investors looking to balance the search for growth with some caution, the "Growth at a Reasonable Price" (GARP) method presents a considered option. This method tries to find companies increasing their earnings and revenues faster than typical, but whose stock prices are not too high. The aim is to sidestep the speculation of extreme growth stocks while still taking part in solid business development. One instrument for using this method is an "Affordable Growth" stock filter, which selects for companies with good growth, firm profit and financial strength, and a stock price that seems acceptable.
Corcept Therapeutics Inc (NASDAQ:CORT) is a commercial-stage pharmaceutical company that creates medicines for serious conditions by affecting the hormone cortisol. Its main product, Korlym, treats Cushing's syndrome, and the company is working on newer potential treatments.
Growth Path: Firm Past and Quickening Future
The central idea of the GARP method is finding steady and quickening growth, and Corcept's situation is notable here. According to ChartMill's fundamental review, the company gets a firm Growth Score of 8 out of 10. This score is backed by both past results and what is anticipated next.
- Sales Momentum: The company has shown good sales growth, with revenue rising 17.92% in the last year and at a typical yearly rate of 17.11% in recent years.
- Earnings Quickening: While earnings per share (EPS) decreased last year, the longer-term typical yearly EPS increase stays a sound 9.71%. More significantly, analysts predict a marked quickening.
- Next Expectations: Future growth predictions are particularly firm, with EPS predicted to increase 46.02% each year and sales forecast to rise 24.42%. The review states that both EPS and sales growth rates are quickening, a good sign for momentum.
This mix of sound past sales increase and a much better earnings forecast is exactly what growth-focused investors seek, giving a base for future stock price gains.
Price Context: Acceptable Inside a Costly Field
An acceptable stock price is the key balance in the GARP method, stopping investors from paying too much for growth. Corcept gets a Price Score of 5 from ChartMill, showing a middle view that is not very low nor very high. This score shows a varied situation that needs context.
- Standard Measures: On its own, Corcept's Price-to-Earnings (P/E) measure of 45.42 and Next Year P/E of 64.59 seem high, particularly next to the wider S&P 500.
- Field-Relative Price: The view shifts when seen next to its field. The pharmaceutical field often has higher prices due to its stable nature and future potential. Within this group, Corcept's price seems more acceptable. Its P/E measure is lower than almost 77% of field peers, and its Price-to-Free-Cash-Flow measure is lower than over 83% of similar companies.
- Growth Reason: The review clearly states that the company's "excellent profit" and high predicted earnings growth could support a higher P/E measure. For GARP investors, paying a modest higher price for better, quickening growth can be suitable if the core business is sound.
Base Strength: Profit and Financial Soundness
Lasting growth needs a stable base, which is why the Affordable Growth filter also selects for acceptable profit and soundness. Corcept does very well here, giving trust that its growth is not driven by financial danger. It gets a high Profit Score of 8 and an equally firm Soundness Score of 8.
- Profit Leader: The company has excellent margins, including a Gross Margin over 98% and a Profit Margin better than 86% of its field. Its returns on assets, equity, and invested capital (ROIC) all place in the top part of the pharmaceuticals field. A steady positive operating cash flow further supports the quality of its earnings.
- Very Strong Financial Position: Corcept's financial soundness is a major plus. The company has no debt, putting it in a top position within its field. Its Altman-Z score of 15.91 shows a very small short-term chance of financial trouble, and it keeps good liquidity with current and quick ratios above 3, showing no problem meeting near-term needs.
These high scores in profit and soundness lower investment risk. They show the company's growth is helped by effective operations and a very strong financial position, letting it pay for future work from within and handle possible field challenges.
Summary and More Study
Corcept Therapeutics shows an example of the Affordable Growth or GARP investment idea. The company is set for a time of quickened earnings and sales increase, meeting the main "growth" need. Its stock price, while not low on its own, seems acceptable next to its fast-growth pharmaceutical peers and is supported by exceptional base measures. The excellent scores in profit and financial soundness suggest this growth is lasting and low-risk, which is key for the method's goal of finding durable compounders.
For a complete look at all fundamental parts, you can see the full fundamental review report for Corcept Therapeutics.
Corcept was found using a specific filter for Affordable Growth stocks. Investors wanting to find other companies that match this profile of firm growth, acceptable price, and sound fundamentals can see more results using the Affordable Growth stock filter.
Disclaimer: This article is for information only and is not financial advice, a suggestion to buy or sell any security, or a support of any investment method. Investors should do their own complete study and think about their personal money situation and risk comfort before making any investment choices.
