Gold Fields Ltd. (NYSE:GFI) Offers "Growth at a Reasonable Price"

For investors looking to balance the search for growth with fiscal care, the "Growth at a Reasonable Price" (GARP) method presents a strong middle path. This method tries to find companies that are increasing their earnings and revenue faster than average, but whose stock prices are not at a high speculative level. By concentrating on stocks with good fundamental condition and earnings, the method works to reduce risk while still seeking the benefit of growth. One instrument for applying this is the "Affordable Growth" screen, which selects for companies with high growth scores, good earnings and financial condition, and a stock price that is not too high. A present example from this screening is GOLD FIELDS LTD-SPONS ADR (NYSE:GFI).

A Firm Growth Path

The central idea of any GARP method is, expectedly, growth. Gold Fields shows this feature clearly, receiving a top Growth Rating of 9 out of 10 in its fundamental analysis report. The company's recent results are especially notable, with both earnings and revenue rising strongly over the last year.

• Earnings Per Share (EPS) increased by a notable 196.68% in the last year, with a firm average yearly growth rate of 48.07% over recent years.
• Revenue rose by 50.41% over the past year, supported by a good historical average yearly growth rate of 11.88%.

Maybe more critical for future-focused investors, this pace is forecast to continue. Analyst projections estimate average yearly EPS growth above 52% and revenue growth close to 25% in the next years. This mix of strong past results and a positive future view is precisely what growth-focused investors seek, offering a base for possible stock price gains.

Valuation: The "Reasonable Price" Test

Finding a fast-growing company is only part of the task, paying a high price for it can erase all the possible profit. This is where the valuation review becomes key. Gold Fields gets a Valuation Rating of 8, suggesting the market may not have completely valued its growth outlook. While a standard Price-to-Earnings (P/E) ratio of 24.55 might seem high alone, the situation shows a more appealing view.

• The Forward P/E ratio, based on forecast earnings, is a much lower 10.16, which looks good next to both the industry and the wider S&P 500 average.
• Other valuation measures also point to a fair price:
  • Its Enterprise Value to EBITDA ratio is lower than 77% of its industry group.
  • Its Price to Free Cash Flow ratio is lower than almost 79% of the industry.
• The low PEG Ratio, which modifies the P/E for growth, further indicates that the stock's present price may not fully account for its high expected earnings growth rate.

This valuation picture is key to the "affordable growth" idea. It implies investors are not required to pay a high price for future growth now, which can offer some protection and improve possible returns.

Supporting Fundamentals: Earnings and Condition

A company can grow fast and seem inexpensive, but if it loses money or is financially weak, the investment holds notable risk. The GARP method directly considers this by needing acceptable scores in earnings and financial condition. Gold Fields does well and fits these requirements solidly.

Its Profitability Rating is a full 10, supported by top-level margins and returns. The company's Return on Equity of almost 31% and Operating Margin above 53% are some of the highest in the metals and mining industry. High earnings are important as they supply the internal money to support future growth without too much need for debt or stock dilution.

The Financial Health Rating of 6 shows a mostly firm, though not perfect, balance sheet. Important positives involve a very good Altman-Z score of 8.12, showing low bankruptcy danger, and an acceptable Debt-to-Equity ratio of 0.41. While some cash ratios are average next to peers, the company's strong cash flow production, shown by a low debt-to-free-cash-flow ratio of 2.08, gives good ability to meet its needs. This financial steadiness lowers the operational risks that can interrupt a growth narrative.

Conclusion

Gold Fields offers a strong case for investors using a Growth at a Reasonable Price framework. It mixes very strong recent and forecast growth with a valuation that seems modest next to that growth outlook. This central appeal is supported by excellent earnings measures and a financially sound operating foundation. The company's profile matches closely with the "Affordable Growth" screen's goal: to find companies where high growth is not outweighed by too high valuation or basic flaws.

For investors wanting to review other companies that fit similar standards of good growth, fair valuation, and acceptable fundamentals, more results can be located using this Affordable Growth stock screen.

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Disclaimer: This article is for information only and is not financial advice, a suggestion, or an offer or request to buy or sell any securities. The information shown is based on supplied data and should not be the only source for any investment choice. Investing includes risk, including the possible loss of original capital. Always perform your own research and think about talking with a qualified financial advisor before making any investment choices.