Vericel Corp (NASDAQ:VCEL) Emerges as a Top GARP Investment Candidate

For investors looking to balance the search for high-growth companies with some valuation care, the "Growth at a Reasonable Price" (GARP) method presents a thoughtful middle path. This method tries to find companies with good and lasting growth paths, but whose shares are not valued at extreme highs that assume all future success. Looking for stocks with good growth scores, firm basic profitability and financial soundness, and a valuation that is not too high can help find possible chances that have further potential. One stock that recently appeared through an "Affordable Growth" filter, which uses these GARP ideas, is Vericel Corp (NASDAQ:VCEL).

Growth Profile: A Central Point

The base of any GARP pick is, expectedly, growth. Vericel’s basic report points to this as a main area of force, giving it a Growth Score of 7 out of 10. The company is showing speed in both its recent results and its estimated future.

• Good Past Revenue Growth: In recent years, Vericel has reached an average yearly revenue growth of 15.01%, a speed that points to firm business growth. The latest year saw revenue rise by 14.05%.
• Major Earnings Speed Increase: Maybe more importantly, the company's Earnings Per Share (EPS) jumped by 300% over the past year. While the longer-term yearly EPS growth is more moderate, analysts forecast a strong speed increase.
• Good Future Forecasts: The growth narrative is anticipated to persist. Projections indicate an average yearly EPS growth of about 60% and revenue growth approaching 18% in the next few years. This forward growth picture is important for supporting a growth stock's valuation.

Valuation: Acceptable Within a High-Value Field

Valuation is the "reasonable price" part of the GARP idea. Vericel gets a neutral Valuation Score of 5. This score shows a varied situation that is typical for profitable growth companies in the biotechnology field. The review is not one of low value, but rather of a valuation that could be acceptable given the growth picture.

• High Straight Multiples: On a straight basis, standard measures seem high. The company's Price-to-Earnings (P/E) ratio is over 150, which is costly next to the wider S&P 500 average.
• Field-Relative Price: Setting matters. Inside the high-growth biotechnology business, Vericel's valuation seems more acceptable. Its P/E ratio is lower than almost 89% of its field competitors. In the same way, its Price-to-Forward Earnings and Enterprise Value-to-EBITDA ratios are also more appealing than most companies in its field.
• Growth Balance: The review states that the high P/E ratio could be balanced by the company's very strong forecasted earnings growth and its firm profitability. This is the core of the GARP filter thinking, paying a higher price, but one that is backed by clear growth and quality measures.

Supporting Basics: Profitability and Soundness

A filter for "affordable growth" purposefully looks past just growth and price. It needs the company to have the operational force and financial steadiness to carry out its growth plans, which is where profitability and financial soundness scores are important.

Vericel gets a 7 for Profitability, a high score within its field. Main strong points include:

• Margins that are with the best of its competitors, including a Gross Margin over 73% and a positive Operating Margin.
• Returns on Assets, Equity, and Invested Capital that all do better than about 90% of the biotechnology business.
• A record of positive operating cash flow.

The Financial Soundness score is a 6. The company shows very good cash availability, with current and quick ratios pointing to no near-term payment worries, and has almost no debt on its balance sheet. The report does note some small concerns, like share dilution and a recent year-over-year drop in its debt-to-assets ratio, but in total, the company's payment position is seen as firm.

Summary and Next Steps

Vericel Corp shows a profile that matches the goals of an affordable growth filter. It displays a strong and speeding earnings growth story, backed by good field-relative profitability. While its straight valuation multiples are high, they are viewed next to its field and its good growth outlook, placing it in an "acceptable" area for GARP-focused investors. The company's clear balance sheet and high margins give a base of quality that backs the growth story.

This review of Vericel came from a basic report made by filtering for specific GARP rules. Investors curious about finding other companies that fit a similar profile of acceptable growth, decent profitability and soundness, and acceptable valuation can find more possible picks by seeing the results of the Affordable Growth filter.

Disclaimer: This article is for information only and does not make financial guidance, a suggestion to buy or sell any security, or a support of any investment plan. Investors should do their own complete study and think about their personal money situation and risk comfort before making any investment choices.