Globus Medical Inc (NYSE:GMED): A GARP Stock with Strong Growth and a Reasonable Price

For investors looking to balance the search for growth with fiscal care, the "Growth at a Reasonable Price" (GARP) method offers a practical middle path. This method looks for companies with good and steady growth, while avoiding those with very high prices. The aim is to find businesses where the current price is supported by future earnings, reducing some risk found in pure growth investing. A useful way to apply this method is with tools that review stocks using several basic measures.

One stock found by an "Affordable Growth" screen, which looks for good growth, sound profit and financial strength, and a fair price, is Globus Medical Inc, A (NYSE:GMED). The company, which creates musculoskeletal solutions such as spinal implants and orthopedic trauma devices, shows a profile worth reviewing for GARP.

Growth Profile: A Strong Base

The central idea of any GARP method is clear growth, and Globus Medical does well here with a Growth Rating of 7 out of 10. The company's past results show strong speed, while analysts forecast continued, though slower, increase. This mix of good past results and a believable future view is important for investors wanting steady growth.

• Past Speed: Over the last year, the company increased its Earnings Per Share (EPS) by 22.76%, while revenue rose by 11.75%. More notable is the multi-year revenue growth rate, averaging 26.25% each year.
• Future Forecasts: For the future, analysts expect EPS to increase about 10.62% per year, with revenue growth forecast near 8.32%. This shows a slowdown from the fast speed of recent years, but it is still a good and above-average growth picture.

For a GARP investor, this path is necessary. It confirms the company's business model works and is growing, providing the "growth" part without depending only on uncertain future hopes.

Valuation: The "Reasonable Price" Test

A stock can show excellent growth but still be a bad investment if its price is too steep. This is where the price review becomes important, and Globus Medical's Valuation Rating of 5 points to a neutral or fair price position compared to its outlook, just what a reasonable price screen tries to find.

• Different Views on P/E: The company's Price-to-Earnings (P/E) ratio of 26.58 and Forward P/E of 22.50 seem high on their own. Yet, comparison matters. Compared to similar companies in the Health Care Equipment field, which often have high prices, GMED seems less expensive, doing better than 77-80% of its field on these measures.
• Attractive Cash Flow & EBITDA Measures: More positive are other price measures. The company's Price-to-Free Cash Flow and Enterprise Value-to-EBITDA ratios are in the best group of its field, with over 81% of competitors priced higher. This suggests the market may be pricing its current cash generation ability in an appealing way.
• Growth Adjustment: The PEG ratio, which changes the P/E for expected growth, shows a proper price. This fits the GARP idea, indicating investors are not paying too much for the growth they are forecast to get.

Supporting Basics: Profit and Financial Strength

A growth narrative built on weak finances is risky. The Affordable Growth screen needs adequate scores in profit and financial strength to ensure the company's growth is sound and lasting. Globus Medical meets this, with a Profitability Rating of 7 and a Health Rating of 7.

Profit is strong, with Return on Assets (8.32%), Return on Equity (9.63%), and Return on Invested Capital (8.29%) all in the top 15% of the field. The company also keeps good gross (67.05%) and operating (17.37%) margins. This shows efficient use of money and a good market position, which helps continued spending on growth.

Financial Strength is also firm. The company has an excellent Altman-Z score of 12.46, showing very little near-term bankruptcy risk. Significantly, it has no debt, giving a Debt/Equity ratio of 0.00 and a perfect Debt-to-Free-Cash-Flow ratio. This very strong financial position provides notable stability and option to handle economic changes and pay for future growth projects from within.

Conclusion

Globus Medical Inc. shows an example of the profile sought by Growth at a Reasonable Price methods. It combines a clear and expected growth path in the medical technology field with a price that, while not very low, is fair compared to its field and growth rate. This is supported by good profit measures and an extremely sound, debt-free financial position. For investors, this mix tries to give access to growth while providing some safety through quality basics and a careful price review.

A full review of these basic ratings is in the full ChartMill Fundamental Analysis Report for GMED.

Want to review other stocks that match this Affordable Growth profile? You can use the screen yourself and find more possible choices here.

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 given is based on supplied data and should not be the only reason for any investment choice. Investing has risk, including the possible loss of the original investment. Always do your own research and think about talking with a qualified financial advisor before making any investment choices.