For investors looking to balance the search for growth with fiscal care, the "Growth at a Reasonable Price" (GARP) method presents a practical middle path. This method tries to find companies that are increasing their earnings and revenue at a good rate and are also priced at levels that do not require flawless future results. It avoids the speculation common with high-growth stocks and the possible pitfalls of very low-priced stocks. By concentrating on firms with good basic operations, including strong earnings and a sound financial structure, together with fair prices, the GARP method aims to create a portfolio set for steady, long-term increase in value.
One stock that recently appeared in a numerical filter for such "affordable growth" traits is Hamilton Lane Incorporated - Class A (NASDAQ:HLNE). The company works as a top private markets investment firm, offering services in private equity, credit, real assets, and venture capital to clients around the world. Its way of doing business, which creates fee-based earnings and possible performance income, has shown itself to be steady and profitable.
Growth Path: Solid Past and Expected Progress
The central idea of any growth method is, expectedly, growth. Hamilton Lane shows a solid history and positive future projections that support its place in this group. The company's past results show a business that has grown noticeably.
- Revenue Growth: In the last several years, Hamilton Lane has recorded a very good average yearly revenue growth of 21.08%. More lately, revenue rose by 10.37% over the past year.
- Earnings Per Share (EPS) Growth: The company's EPS has increased at a notable average rate of 20.18% per year in recent history. While the most recent year-over-year rise was a smaller 7.68%, the long-term pattern stays strong.
- Future Expectations: Analyst forecasts indicate this progress is likely to keep going. Projections point to an average yearly EPS growth of 16.03% and revenue growth of 17.36% in the next few years.
This mix of a good historical growth rate and a solid, though somewhat slower, growth view for the future is exactly what GARP investors seek, proof of a lasting business model, not just a short-term surge.
Price Evaluation: Fair Given the Situation
A stock can show very good growth but still be a bad investment if the cost is too great. The affordable growth filter specifically looks for stocks that are "not overpriced," and Hamilton Lane's price measures show a varied but finally fair view.
- Price-to-Earnings (P/E): The company sells at a P/E ratio of 18.71. While this might be seen as high on its own, the situation matters. This ratio is similar to the industry average and is clearly lower than the current S&P 500 average of about 27.10.
- Forward P/E: Looking forward, the Price/Forward Earnings ratio of 16.19 is also comparable to its industry group and seems appealing next to the wider market.
- Other Measures: The price argument gets stronger when checking other metrics. Based on its Enterprise Value to EBITDA ratio, Hamilton Lane costs less than almost 74% of its industry rivals. Also, its Price/Free Cash Flow ratio is better than roughly 65% of the sector.
The review implies that while the stock is not very low-priced, its cost matches its growth and quality without entering speculative areas. The detailed basic report gives HLNE a Price Rating of 5, showing a fair, moderate review that fits the GARP idea of staying away from extreme high prices.
Basic Operational Strength: Earnings and Financial Soundness
Lasting growth cannot stand alone; it must be backed by a profitable business and a firm financial base. This is where Hamilton Lane does very well, providing the "support" that makes its growth story more believable and less dangerous.
Earnings power is a notable feature. The company receives a high Earnings Rating of 8. Important strong points include:
- Outstanding returns on capital, with a Return on Invested Capital (ROIC) of 16.05% and a Return on Equity (ROE) of 26.61%, each doing better than most industry peers.
- Good and improving margins, including a Profit Margin of 30.59% and an Operating Margin of 42.80%.
Financial Soundness is also good, with a Soundness Rating of 7. The financial structure shows strength in important areas:
- Very small debt amounts, with a Debt-to-Equity ratio of 0.32 and a Debt-to-Free-Cash-Flow ratio of only 0.79, showing good ability to handle debts.
- A firm Altman-Z score of 4.06, pointing to low short-term failure risk and doing better than over 81% of the industry.
These high scores in earnings and soundness are vital for the affordable growth method. They show the company's growth is being reached effectively and is built on a stable foundation, lowering the chance that expansion will be stopped by financial trouble or poor business performance.
Summary and Additional Study
Hamilton Lane Incorporated offers a practical example for the Growth at a Reasonable Price method. It pairs a shown and predicted better-than-average growth path in the growing private markets field with a price that, while not low, seems reasonable compared to its quality and the wider market. Most importantly, this growth is supported by very good earnings measures and a sound financial state, giving investors some safety often missing in growth-only stories.
For investors wanting to find other companies that match this balanced picture of growth, price, and basic strength, more outcomes from the "Affordable Growth" filter can be found here.
Disclaimer: This article is for information only and is not financial advice, a suggestion to buy or sell any security, or a support of any investment method. The information given is based on data thought to be reliable but is not certain. Investors should do their own complete study and think about their personal money situation and risk comfort before making any investment choices.
