Interparfums Inc. (NASDAQ:IPAR) Passes the Peter Lynch GARP Investment Test

For investors looking for a structured, long-term way to build wealth, few strategies are as respected as Peter Lynch's method. The famous manager of Fidelity's Magellan Fund supported investing in what you understand, concentrating on companies with clear operations, steady growth, and good finances. His system is not about following risky trends but finding growth available at a fair price, a philosophy called Growth at a Reasonable Price (GARP). By using specific filters for earnings, financial strength, and price, investors can search the market for companies that match this careful, long-term idea.

One company that recently appeared from a filter using Lynch's measures is INTERPARFUMS INC (NASDAQ:IPAR). The New York-based company works in the worldwide fragrance and beauty industry, making and distributing scents under a collection of licensed and owned brands, such as Coach, Jimmy Choo, Montblanc, and Lacoste. For investors who follow Lynch's ideas, Interparfums offers a strong example of how a "simple" but necessary consumer goods company can display the signs of a good long-term investment.

Fit with Lynch's Main Investment Rules

Peter Lynch's approach stresses steady growth, high earnings, a solid balance sheet, and a good price. Interparfums seems to meet these points based on the main numbers used in the filter.

• Steady Earnings Growth: Lynch preferred companies increasing earnings per share (EPS) between 15% and 30% each year, a rate that shows leadership without being unstable. Interparfums displays a five-year average EPS growth rate of 22.3%, well inside this target zone. This shows a record of reliable, above-normal increase.
• Good Price via the PEG Ratio: To prevent paying too much for growth, Lynch used the Price/Earnings to Growth (PEG) ratio, looking for a value of 1 or lower. A PEG under 1 implies the market may not completely recognize a company's growth path. With a PEG ratio of 0.73, Interparfums is priced in a way that rewards investors for its past growth, a central part of the GARP method.
• High Earnings (ROE): Return on Equity (ROE) shows how well a company produces profit from shareholder equity. Lynch wanted ROE above 15%. Interparfums does very well here, with an ROE of 18.9%, indicating good management and a profitable operation.
• Very Strong Financial Health: A cautious balance sheet was essential for Lynch. Two filters show Interparfums' strength:
  • Debt/Equity Ratio: At 0.17, the company is funded mostly by equity, much lower than the filter's limit of 0.6 and even Lynch's own stricter target of under 0.25. This small debt level gives important stability in weak economic times.
  • Current Ratio: A gauge of short-term cash health, with a ratio above 1 meaning enough assets to pay near-term debts. Interparfums' strong Current Ratio of 3.27 shows good financial room.

A Summary View of Basic Strength

A wider view of Interparfums' basic profile supports the image shown by the Lynch filter. The company's total financial health is notable, with an Altman-Z score pointing to very low failure risk and a debt amount that could be repaid from free cash flow in about 1.5 years. Earnings are another area of high performance; the company has top-level margins and returns on invested capital (ROIC), implying it holds a lasting edge in its brand collection and business activities.

Price measures look fair. The stock sells at a P/E ratio a bit under its industry group and the wider S&P 500, which, along with its high earnings and growth history, helps the argument for it being fairly priced. The primary point of care comes from the growth forecast, where analyst estimates for future EPS and sales growth are more conservative than the past rate, a detail long-term investors should watch.

For a complete look at these positives and negatives, you can see the full fundamental analysis report for IPAR.

Fit for the Long-Term GARP Investor

Interparfums represents the kind of company Peter Lynch might have liked. Its products, designer fragrances, are easy to grasp and hold a steady place in the global consumer market. The company is not a risky technology bet but a consistent performer with a group of wanted brands. Its finances show this: high earnings, very little debt, and good cash flow. The Lynch filter found it because its historical growth has been both meaningful and steady, and the market now prices that growth at a fair level (PEG < 1).

For the GARP-oriented, buy-and-hold investor, these are exactly the basic traits to look for. They give a buffer through financial soundness and a way for increasing returns through profitable growth. While future growth may slow, the company's financial strength and shown operational skill offer a firm foundation for long-term results.

Interested in finding other companies that match this structured method? You can use the Peter Lynch filter yourself and see the present outcomes by following this link: Peter Lynch Strategy Stock Screen.

---

Disclaimer: This article is for information only and is not financial advice, a suggestion, or an offer to buy or sell any security. Investing has risk, including the possible loss of your original investment. You should do your own research and talk with a qualified financial advisor before making any investment choices.