Natural Grocers by Vitamin Cottage (NYSE:NGVC) Fits Peter Lynch's 'Growth at a Fair Price' Model

Investors looking for long-term growth chances at fair prices frequently consider methods created by famous fund managers. Peter Lynch's system, explained in his book One Up on Wall Street, stresses finding companies with lasting earnings growth, good financial condition, and fair prices. This method centers on fundamental study instead of predicting market movements, aiming for businesses that can provide steady results over long stretches. The system mixes parts of both growth and value investing by demanding good profitability measures and steering clear of expensive stocks.

Fitting Peter Lynch's Standards

Natural Grocers by Vitamin Cottage (NYSE:NGVC) appears as a company to look at using Lynch's system. The firm's fundamental numbers fit several important needs that Lynch saw as necessary for long-term investment achievement.

The grocery store shows the kind of lasting growth Lynch liked:

• Earnings per share have increased at an average yearly pace of 17.84% over the last five years
• This fits inside Lynch's chosen span of 15-30%, showing growth that is meaningful and possibly maintainable
• Recent EPS growth of 35.14% reveals rising profitability

Pricing measures also match Lynch's rules for fair cost:

• The PEG ratio of 0.85 is lower than Lynch's limit of 1.0
• This suggests the stock could be fairly priced compared to its growth path
• A P/E ratio of 15.18 looks good next to both industry and wider market numbers

Financial condition signs show the careful method Lynch supported:

• Debt-to-equity ratio of 0.21 is much lower than the system's highest limit of 0.6
• Current ratio of 1.02 meets the lowest need for short-term financial steadiness
• Return on equity of 21.56% is much higher than the 15% minimum Lynch demanded

Fundamental Review Summary

The company's total fundamental score of 5 out of 10 puts it in the middle range, although this rating hides some points of ability. Natural Grocers shows special ability in profitability measures, with profit margins and operating margins rated with the industry's top players. The company's balance sheet without debt is a notable advantage, offering financial options and lowering risk during economic declines.

Pricing seems fair compared to both industry similar companies and wider market numbers, while the dividend yield of 1.98% has a maintainable payout ratio and a record of yearly raises. Some worries exist about liquidity measures and the absence of analyst coverage for future growth estimates, which investors should watch carefully. Detailed fundamental study offers more information on these numbers.

Investment Points

For investors using Lynch's thinking, Natural Grocers represents the sort of "simple" business the famous manager often preferred - a local grocery chain working in a clear business model. The company's attention on natural and organic goods matches customer patterns that many investors can see in their everyday lives, another Lynch idea. The mix of fair pricing, good profitability, and careful financial setup makes a profile that fits what Lynch called "growth at a fair price."

While the company deals with competitive forces in the grocery industry and displays some liquidity worries, its special place in natural and organic foods gives some protection from mainstream rivals. The lack of analyst coverage could be seen as a good point through Lynch's view, as it implies the company has not drawn too much Wall Street notice.

Investors wanting to find more companies that fit Peter Lynch's investment standards can look at more screening outcomes through our specific screening tool.

Disclaimer: This study is for information only and does not form investment guidance, suggestion, or support of any security. Investors should do their own study and talk with financial advisors before making investment choices.