The search for growth stocks at reasonable prices remains a cornerstone of many investment strategies, aiming to identify companies with strong expansion potential that are not trading at excessive valuations. This approach, often referred to as Growth at a Reasonable Price (GARP), seeks to avoid the high risk associated with speculative, overpriced growth stocks while still capturing the upside of corporate expansion. One method to identify such opportunities is through systematic screening, which filters for equities demonstrating good growth, sound profitability, solid financial health, and an attractive valuation. This multi-faceted analysis helps to surface companies that are not only growing but are doing so on a sustainable and financially prudent foundation.
Fundamental Rating Overview
Gold Fields Ltd. (NYSE:GFI) presents an interesting profile based on a detailed fundamental analysis, earning an overall rating of 8 out of 10. This score is derived from an evaluation across five critical areas: growth, valuation, health, profitability, and dividend. The company's profile is particularly notable for its combination of strong growth and reasonable valuation, which are the primary pillars of the affordable growth strategy. A detailed breakdown of this analysis is available in the full fundamental report.
Growth Trajectory
A key requirement for an affordable growth stock is a demonstrably strong and promising growth path. Gold Fields does well in this dimension, securing a growth rating of 8. The company's historical performance and future prospects indicate significant expansion.
- Earnings Per Share (EPS) surged by an impressive 196.68% over the past year. The average annual EPS growth over recent years stands at a good 48.07%.
- Revenue has also shown strong growth, increasing by 50.41% in the last year, with an average annual growth rate of 11.88%.
- Looking forward, analysts project continued good performance, with EPS expected to grow by 35.90% annually and Revenue forecast to increase by 18.65% per year.
This consistent and accelerating growth across key financial metrics is essential for the GARP strategy, as it provides the fundamental "growth" engine that investors are seeking, supported by both recent results and forward-looking estimates.
Valuation Appeal
The "affordable" or "reasonable price" aspect is equally critical, and Gold Fields stands out with a valuation rating of 9. Despite its strong growth, the company's stock does not appear overvalued when compared to industry peers and the broader market.
- The Price/Forward Earnings ratio is 10.15, which is considered a very decent valuation. This ratio is cheaper than 81.82% of its industry peers and is significantly below the S&P 500 average of 22.87.
- The PEG Ratio, which adjusts the P/E ratio for growth, indicates a rather cheap valuation, suggesting the market may not be fully pricing in the company's growth prospects.
- Other metrics like Enterprise Value/EBITDA and Price/Free Cash Flow also show the company is valued more cheaply than the majority of its industry competitors.
This attractive valuation is what makes the stock's growth potential "affordable." It indicates that investors are not paying a premium for the growth, which can help limit downside risk and provide a more favorable risk-reward profile.
Profitability and Financial Health
While growth and value are the headline criteria, the strategy also requires decent profitability and financial health to ensure the company's growth is sustainable and not built on a fragile foundation. Gold Fields displays notable strength in these supporting areas.
The company has a high profitability rating of 9, driven by exceptional margins and returns on capital. Its Return on Invested Capital of 22.56% is among the best in its industry, outperforming 98% of peers. Furthermore, its Operating Margin of 53.08% and Profit Margin of 28.72% are also top-tier. This high level of profitability indicates efficient operations and a strong ability to convert revenue into earnings, which is crucial for funding future growth internally.
Financially, Gold Fields holds a health rating of 7. It demonstrates high solvency, with an Altman-Z score indicating no near-term bankruptcy risk and a Debt-to-Free-Cash-Flow ratio showing it could pay off its debts in just over two years. This solid financial footing reduces the risk associated with the company's operations and provides stability alongside its aggressive growth.
For investors interested in exploring other companies that meet similar criteria for affordable growth, a pre-configured screen is available. You can view more results from this screen here.
Disclaimer: This article is for informational purposes only and does not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any securities. The analysis presented is based on data believed to be reliable, but its accuracy cannot be guaranteed. All investing involves risk, including the possible loss of principal. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.
