For investors looking for a balance between chance and caution, the "Growth at a Reasonable Price" (GARP) method presents a strong middle path. It seeks to find companies that are not only increasing quickly but are also priced at levels that do not completely account for that possibility, sidestepping the high prices often linked to top growth stocks. One way to find these options is through an "Affordable Growth" filter, which selects for stocks showing good growth basics, firm profit and money strength, and a price that stays fair. Harmony Biosciences Holdings (NASDAQ:HRMY) results from this filter, showing a picture that justifies more study from investors using this careful method.
A Base of Good Growth
The central idea of any GARP method is, expectedly, growth. A company must show a clear ability to grow its business, as this is the force that should lead to future gains for shareholders. Harmony Biosciences does very well here, receiving a high Growth Score of 9 out of 10 from ChartMill's basic review.
The company’s recent results are especially notable:
- Earnings Per Share (EPS) rose by 50.71% over the last year, with a combined yearly growth rate of 44.61% over a longer time.
- Revenue has also grown firmly, going up by 21.13% in the last year. This follows a notable past growth path.
Also, experts expect this pace to keep going. Predictions point to an average yearly EPS growth of 35.10% and revenue growth of 14.79% in the next years. This mix of good past results and a positive future view is exactly the growth picture wanted in an affordable growth plan, as it gives proof of a business that can grow in size, not just a single occurrence.
Strong Price Measures
Finding growth is only part of the task, the "reasonable price" part is what makes GARP different from simple growth investing. Paying too much for future growth puts an investment at greater loss risk if hopes are not achieved. Harmony Biosciences is notable for its good price, getting a Price Score of 9.
A detailed view of the main numbers shows why:
- Price-to-Earnings (P/E) Ratio: At 11.27, HRMY's P/E ratio is not only fair alone but also looks good next to its industry group and the wider market. The review shows that 89.53% of companies in the drugs industry cost more by this measure.
- Forward P/E Ratio: An even stronger number is the forward P/E of 8.29, which costs less than 91.62% of industry rivals. This hints the market has not yet set a price for the company's expected earnings growth.
- Other Ratios: The appeal reaches other price measures. The company's Enterprise Value to EBITDA and Price/Free Cash Flow ratios each cost less than about 95% of its industry group.
This price view is key for the affordable growth idea. It suggests investors are not required to pay extra for Harmony's growth story now, possibly giving a buffer and space for the price ratio to increase if the company keeps performing.
Supporting Basics: Profit and Money Strength
While growth and price are the main features, a lasting GARP investment needs a solid base. A company cannot grow well if it is not making money, and it cannot handle problems if its finances are poor. Harmony Biosciences also scores well here, with Profit and Money Strength Scores of 8 each.
The company's profit numbers are a main positive point:
- It shows better returns, with a Return on Invested Capital (ROIC) of 17.20%, doing better than almost 95% of its industry.
- Margins are firm, with a Profit Margin of 22.48% and an Operating Margin of 27.32%, both placed in the top ten percent of the drugs field.
From a strength view, the finances are sound:
- The company has very little debt, with a Debt-to-Equity ratio of 0.18 and a very low Debt-to-Free-Cash-Flow ratio of 0.57, pointing to good ability to pay.
- Cash on hand is sufficient, with Current and Quick Ratios above 3.7, giving good room to pay for activities and growth plans.
These good scores in profit and strength are not extra points, they are needed parts in an affordable growth filter. They help confirm that the found growth is of good quality and can last, backed by a business that makes actual cash and works from a place of money power, lowering investment risk.
Final Points
Harmony Biosciences shows a united investment picture that fits well with the ideas of Growth at a Reasonable Price. The company displays fast growth in earnings and revenue, sells at a price that seems separate from that growth path when viewed next to peers, and is supported by very good profit and a strong set of finances. This mix points to a business that is doing well in its area of brain treatments without having the very high price usually linked to such results.
For investors wanting to review other companies that match this careful "Affordable Growth" set of rules, you can see the full filter and its findings here.
Disclaimer: This article is for information only and is not money advice, a suggestion, or a bid to buy or sell any securities. The review uses data and scores from ChartMill.com, like those in the basic report for HRMY. Investors should do their own separate study and think about their personal money situation before making any investment choices. Past results do not show future outcomes.
