For investors looking to balance the search for growth with a degree of caution, the Growth at a Reasonable Price (GARP) method presents a strong middle path. This method tries to find companies that are increasing at an above-average speed but are not priced at extreme levels. It avoids the high risk of speculative stocks while also steering clear of the slow progress that can come with very low-priced choices. One useful way to apply this method is by using basic screening tools that grade stocks on important areas such as growth, valuation, profitability, and financial soundness. A stock that receives a high grade in growth and keeps good grades in the other areas can be a leading choice for this reasonably priced growth method. One company currently noted by this process is GOLD FIELDS LTD-SPONS ADR (NYSE:GFI).
A Notable Fundamental Profile
A close fundamental analysis report for Gold Fields shows a total grade of 9 out of 10, putting it in the highest group of its Metals & Mining industry group. This good total grade is formed from outstanding grades in several key areas, which match well with the supports of the GARP method. The company's profile shows that strong growth and good valuation can exist together with high profitability and a sound balance sheet.
Notable Growth Path
The base of any growth investment is, expectedly, growth itself. Gold Fields does very well here, getting a Growth grade of 8. The company is not just increasing, it is increasing at a very fast speed. Over the last year, its Earnings Per Share (EPS) rose by a notable 267.75%, while Revenue went up by 135.10%. More significantly, this is not a single event. The company has set a good history, with EPS increasing at an average yearly rate of 37.38% over recent years. Looking forward, analysts think this speed will keep going, though at a more steady but still solid pace, with predicted yearly EPS growth of 18.61%. For a GARP investor, this mix of remarkable past results and a good future growth view is a main draw.
Strong Valuation Measures
A sensible price is what divides GARP from pure growth seeking. Gold Fields also does well here, getting a high Valuation grade of 9. The stock seems notably low-priced compared to both its industry and the wider market. Key measures show this point clearly:
- Price-to-Earnings (P/E) Ratio: At 11.36, GFI's P/E ratio is much lower than the industry average of 38.18 and the S&P 500's average of 27.05. It is priced lower than 99% of its industry group on this base.
- Price-to-Forward Earnings: The forward-looking P/E ratio of 11.84 stays attractive, being lower than 83% of industry rivals.
- Enterprise Value to EBITDA & Price/Free Cash Flow: The company also grades well on other valuation multiples, pointing to a low price relative to its cash production and operational earnings.
This valuation view hints the market may not be completely pricing in the company's growth and quality, showing a possible opening for investors looking for reasonably priced growth.
Supported by Profitability and Financial Soundness
Good growth at a low price can sometimes be misleading if the basic business is not strong. This is where Gold Fields' other fundamental strengths give important confidence. The company has a perfect Profitability grade of 10, pointing to top-level efficiency and earnings ability.
- High Margins: Its Profit Margin of 37.57% and Operating Margin of 57.01% do better than most of its industry, showing the company changes revenue into earnings very efficiently.
- Notable Returns: Returns on Assets (30.17%), Equity (54.48%), and Invested Capital (34.48%) are all excellent, showing management's ability in using capital to create profits.
Also, the company keeps a sound Financial Health grade of 8. While some liquidity ratios are medium, its ability to pay debt is good. With a low Debt-to-Free Cash Flow ratio of 1.37 and an Altman-Z score pointing to low bankruptcy risk, the company's balance sheet is set to support its growth plans without too much financial pressure. For the GARP method, this health and profitability are essential; they make sure the growth is lasting and the business model is stable.
Conclusion
Gold Fields presents a strong case as a "reasonably priced growth" stock. It successfully joins a powerful growth story, shown by excellent past and expected future earnings increase, with a valuation that stays sensible. This good price-to-growth idea is further strengthened by top-level profitability and a financially sound base. For investors using a GARP method, which tries to avoid paying too much for growth while making sure of business quality, GFI's fundamental profile meets the important points.
This review of Gold Fields came from a systematic screening process. Investors curious about finding other companies that match this "Reasonably Priced Growth" profile can look at more results using the predefined screen on ChartMill.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer to buy or sell any security. Investing involves risk, including the potential loss of principal. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.