Why EQUINOR ASA-SPON ADR (NYSE:EQNR) 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, commonly known as the Growth at a Reasonable Price (GARP) method. His approach relies on fundamental analysis, selecting businesses with solid earnings, low debt, and reliable profit growth, while steering clear of overpriced or highly indebted firms. The strategy favors holding investments for extended periods to benefit from compounding.

One stock that meets Lynch’s standards is EQUINOR ASA-SPON ADR (NYSE:EQNR), a Norwegian energy firm involved in oil, gas, and renewable energy. Here, we explore why EQNR matches Lynch’s guidelines and why it could interest GARP-focused investors.

Key Criteria Fulfilled by EQNR

1. Steady Earnings Growth (EPS Growth 5Y: 16.82%)
   Lynch favored firms with consistent, moderate earnings growth—usually between 15% and 30%. EQNR’s five-year EPS growth of 16.82% fits this range, showing stable progress without unsustainable spikes.

2. Fair Valuation (PEG Ratio: 0.50)
   The PEG ratio (Price/Earnings to Growth) is key in Lynch’s method, as it accounts for growth when assessing value. A PEG under 1 implies a stock is priced below its earnings potential. EQNR’s PEG of 0.50 indicates its growth isn’t fully priced in, presenting a value opportunity.

3. High Profitability (ROE: 19.13%)
   Lynch looked for firms with a Return on Equity (ROE) above 15%, signaling efficient use of investor funds. EQNR’s ROE of 19.13% beats 83.65% of its peers, highlighting its earnings strength.

4. Solid Financial Position (Debt/Equity: 0.50, Current Ratio: 1.37)
   Financial health was vital to Lynch’s strategy. EQNR’s Debt/Equity ratio of 0.50 is below the 0.6 benchmark in our screen and near Lynch’s ideal of under 0.25. Its Current Ratio of 1.37 also confirms it can cover short-term liabilities.

Strengths and Points to Watch

Our fundamental analysis report notes EQNR’s strong profit metrics, such as a Return on Invested Capital (ROIC) of 24.25%, placing it in the top 3% of its sector. The company also provides a dividend yield of 5.69%, though its payout ratio of 89.44% could be a concern if earnings growth falters.

On the downside, recent drops in EPS (-18.81% YoY) and Revenue (-4.07% YoY) point to short-term challenges, likely due to energy market shifts. Still, the long-term outlook stays positive, with 10.24% yearly revenue growth over five years.

Why EQNR Suits the GARP Method

Lynch’s strategy skips speculative picks, focusing on reliable growth, fair pricing, and sound finances—traits EQNR mostly displays. Though the energy sector fluctuates, EQNR’s mix of traditional and renewable operations, along with prudent financial management, offers stability.

For investors searching for more stocks that align with Peter Lynch’s principles, check our pre-built screen here.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own research or consult a financial advisor before making decisions.