For investors looking for a mix of chance and caution, the "Growth at a Reasonable Price" or "Affordable Growth" method presents a worthwhile option. This method tries to find companies that are increasing their business and profits at a good rate and are also priced at levels that do not require extreme hope about what is to come. By looking for stocks with good growth scores, firm profit and money strength, and a price that is still sensible, investors can try to take part in a company's rise while keeping a buffer of protection. Harmony Gold Mining Co. Ltd. (NYSE:HMY), a well-known gold and copper producer, recently appeared from such a search, leading to a more detailed examination of its basic picture.
A Firm Base in Profit and Strength
Before going into the main growth and price measures, it is important to check the company's operational and money foundation. A high-growth tale cannot last without firm profit and a sound financial record. Based on ChartMill's basic review for HMY, the company does very well in these core areas.
The review gives Harmony Gold a Profit Score of 8 out of 10, pointing to very good returns on capital. Important measures are much better than others in the field:
- Return on Invested Capital (ROIC): 22.66%, higher than 96% of the metals and mining field.
- Return on Equity (ROE): 29.82%, better than 95% of similar companies.
- Profit Margin: A sound 19.47%, placed in the high group of the field.
Also, the company's Financial Strength Score is a firm 7. While present and fast cash ratios are middle of the road, the overall debt situation is very good. The company has very little debt, with a Debt-to-Equity measure of only 0.04, and its Debt-to-Free-Cash-Flow measure of 0.18 shows it could pay off all debt in a short time. This mix of high profit and a careful financial record gives a steady base from which growth can be paid for and kept, a main idea of the affordable growth view.
Strong Growth Path
The "growth" part of the GARP method is clearly seen in Harmony Gold's recent results and what is expected. The company's Growth Score of 7 is backed by notable speed.
Recent Results:
- Earnings Per Share (EPS) jumped by 66.97% in the last year.
- Income rose by 20.39% in the same time, keeping up a multi-year pattern of good top-line increase.
What is Expected:
- Experts guess EPS will increase at a yearly rate of about 30.32% in the next few years.
- Income is also thought to keep a solid growth speed of almost 15% each year.
This effective mix of shown past growth and a good guessed future is just what growth investors want. The method stresses that this growth should not come from financially weak companies, which Harmony Gold's strength and profit scores indicate it is not.
A Good Price Offer
The last, and maybe most important, step in an affordable growth search is price. A stock can show excellent growth, but if it is already valued as if it is perfect, the danger is greater than the possible gain. Harmony Gold's Price Score of 9 out of 10 suggests the market may be valuing the stock modestly compared to its basics.
Several measures indicate the stock is trading at a sensible, if not low, price:
- Price/Earnings (P/E) Ratio: At 14.17, HMY costs less than about 95% of similar field companies and is much lower than the S&P 500 average.
- Forward P/E Ratio: A more meaningful number of 6.37, based on future profit guesses, shows an even clearer view of value, doing better than 97% of the field.
- Price-to-Free-Cash-Flow and Enterprise Value/EBITDA measures also put the company in the lower-priced part of its field.
This is where the GARP method brings the findings together: Harmony Gold is guessed to grow profits quickly (over 30% each year), yet it trades at a forward earnings number below 10. This gap between growth guesses and present price is the main chance the search is made to find. The price gives a soft layer, making sure investors are not paying too much for the growth story.
Final Points and Next Steps
Harmony Gold Mining shows an example of the affordable growth search process. It shows firm, measurable growth in both the recent past and the guessed future. This growth is backed by very good profit measures and a financially sound record with little debt. Importantly, all of this is found at a price that seems low compared to both its own chances and the wider market.
It is key to remember that as a material producer, Harmony Gold's results are linked to gold and copper prices, bringing changes and larger money risks not shown by a numbers-only search. Also, the wider market situation shows a varied picture, with the S&P 500's long-term direction down but its short-term direction up, pointing to a setting where chosen stock-choice methods may be especially fitting.
For investors wanting to look at other companies that meet similar needs of good growth, acceptable basics, and sensible price, more results from the Affordable Growth search can be seen here. A full list of Harmony Gold's separate basic scores and measures is in its full basic review.
Disclaimer: This article is for information only and is not money advice, a suggestion, or an offer to buy or sell any security. Investing has risk, including the possible loss of the main amount. Readers should do their own study and talk with a skilled money advisor before making any investment choices.
