Harmony Biosciences Holdings (NASDAQ:HRMY) Embodies the Affordable Growth Strategy

For investors looking to balance the search for growth with some caution, the "Growth at a Reasonable Price" or "Affordable Growth" strategy offers a sensible middle path. This method tries to find companies that are increasing their sales and profits at a good rate and are also priced at levels that do not require flawless future results. It tries to sidestep the speculation of expensive, high-growth stocks and also avoid stagnant value stocks. One methodical way to apply this strategy is by using fundamental screening tools that rate stocks on important financial areas. Harmony Biosciences Holdings (NASDAQ:HRMY) recently appeared in such a screen, which looked for stocks with good growth, firm profitability and financial soundness, and a sensible price.

A Look at Growth and Value

The center of the affordable growth idea for Harmony Biosciences depends on its high ratings in both growth and valuation, as shown in its detailed fundamental analysis report. This pairing is vital for the GARP strategy; solid growth supports investment, but a sensible price offers a safety buffer.

Growth Measures:

• Strong Historical Growth: The company's sales have increased at an average yearly rate of more than 160% in recent years, with the last year alone having a 21% rise. Significantly, this sales growth is moving effectively to profits, with Earnings Per Share (EPS) rising by 50.7% last year.
• Solid Future Predictions: Analysts forecast this progress to keep going, with estimated yearly EPS growth of 35.1% and sales growth of 14.6% in the next few years. While this is a slowdown from the very high past rates, it is still a good outlook that is faster than most settled pharmaceutical companies.

Valuation Measures:

• Appealing Multiples: Even with this good growth picture, HRMY sells at a Price-to-Earnings (P/E) ratio of only 11.9, which is much lower than both the industry average (~34) and the wider S&P 500 (~27). Its forward P/E ratio of 9.0 further highlights its relative low cost.
• Priced Low Compared to Potential: Other valuation tools like Enterprise Value to EBITDA and Price to Free Cash Flow also show a stock trading at a lower price. The report notes HRMY is less expensive than about 90-96% of its pharmaceutical industry peers on these important valuation measures.

Supporting Basics: Profitability and Financial Soundness

An affordable growth stock must be more than just low-priced and growing; it requires the basic financial strength to maintain its path. This is where Harmony's high ratings in profitability and financial soundness give important support for the investment idea.

Profitability Strength: The company shows high effectiveness in turning sales into profits. Important signs include:

• A firm Return on Equity (ROE) of 22.2% and a Return on Invested Capital (ROIC) of 17.2%, both placed in the top tier of the industry.
• Good profit margins, with a Net Profit Margin of 22.5% and an Operating Margin of 27.3%, indicating its pricing ability and operational efficiency.

Financial Soundness Review: A steady balance sheet lowers risk and allows for funding future growth plans.

• HRMY keeps a very careful debt position, with a low Debt-to-Equity ratio of 0.18. Its Debt-to-Free-Cash-Flow ratio of 0.57 is very good, showing it could clear all its debt in under seven months using its present cash flow.
• Liquidity is good, with a Current Ratio of 3.75, making sure the company can easily meet its near-term responsibilities.

Conclusion

Harmony Biosciences shows an example of the affordable growth screening approach. It displays the needed mix of strong, high-quality earnings growth and a valuation that seems to notably underestimate that growth compared to its industry and the wider market. The company's market success with its main product and its growing work in neurological disorders provide a basic story to fit the numerical ratings. Its better profitability measures and very strong balance sheet further lower the risk of the investment, tackling common problems that can disrupt growth stories.

For investors interested by this mix of growth, value, and quality, Harmony Biosciences deserves more study. It shows the kind of chance that methodical screening tries to find: a basically healthy business growing at a good rate, yet not carrying a too-high price.

Find more stocks that match this "Affordable Growth" description by checking the pre-set screen here.

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Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation to buy or sell any security, or an endorsement of any investment strategy. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.