For investors looking to balance the search for growth with a degree of caution, the "Growth at a Reasonable Price" (GARP) method presents a practical middle path. This strategy focuses on companies with solid and persistent growth, while steering clear of those with very high prices that might increase potential losses. It is a technique that requires more than just upward price movement, insisting on good basic business qualities to justify the growth expectation. One instrument for finding these opportunities is an "Affordable Growth" stock filter, which selects for firms with high growth scores, good profit generation and stable finances, and a price that is not extreme. Veeva Systems Inc-Class A (NYSE:VEEV), a top provider of cloud software for the life sciences field, recently appeared from this filter, offering an example of affordable growth.
A Base of Strong Profit Generation and Stability
Before examining growth and price, the condition of a company's main business and its financial record is most important. A GARP strategy needs a stable base, as fast growth cannot last without good economics and a secure financial state. Veeva is very good in these aspects, receiving high marks for both profit generation and financial stability.
The company's profit measures are notable, with a ChartMill Profitability Rating of 9 out of 10. This rating is backed by sector-leading margins and returns:
- Profit Margin: At 27.93%, Veeva does better than 97% of other companies in the Health Care Technology sector.
- Return Measures: Its Return on Assets (10.63%) and Return on Equity (12.22%) also rank in the top 3% of the sector.
- Operational Efficiency: An Operating Margin of 28.88% further highlights the effectiveness of its business operations.
Also strong is Veeva's financial stability, which receives a rating of 9. The company holds a very secure financial position marked by:
- No Debt: Veeva has no debt that requires interest payments, removing concerns about repayment and offering notable financial room to maneuver.
- Good Liquidity: With a Current Ratio and Quick Ratio both at 7.53, the company has more than enough to meet near-term needs, performing better than over 91% of its sector.
- Financial Risk: An Altman-Z score of 24.75 shows almost no chance of severe financial trouble.
This pairing of high profit generation and excellent stability means Veeva's growth is financed from a secure position, not by borrowing, a key point for lasting expansion.
Continued and Expected Growth Path
The "growth" part of the GARP strategy is evident. Veeva gets a Growth Rating of 7, indicating a solid record of expansion and a good forecast. The company has effectively turned the digital shift in the life sciences field into steady, high growth.
Recent results and what is expected next show this pattern:
- Past Results: Over the last year, Revenue increased by 15.96% and Earnings Per Share rose by 23.84%. The 3-year average yearly revenue growth is a strong 20%.
- Future Expectations: Analysts forecast continued good growth, with estimated average yearly EPS growth of 15.33% and revenue growth of 14.37% in the next few years.
While the expected growth rate is a step down from the very high speed of recent years, it is still "quite good" and shows a company that is becoming more established while still taking important chances in its specialized market. This shift from very fast growth to solid, lasting growth is often where GARP possibilities are found.
Price Assessment in Perspective
The most subtle part of the GARP review is price assessment—finding the "reasonable price." Veeva's Valuation Rating of 5 indicates a middling or fair price relative to its own future and the market. It is not obviously low nor overly high.
Important price measures show a varied but finally fair view:
- P/E Ratio: At 31.06, Veeva's P/E is higher than the S&P 500 average (~26.1) but is actually lower than 77% of its own tech sector counterparts, which often have high multiples.
- Forward P/E: The forward P/E of 27.91 is more attractive, trading below the broader S&P 500's forward average (~36.2).
- Growth Consideration: The PEG ratio, which includes earnings growth, suggests a fair price. The high profit generation and good expected growth are viewed as balancing the current earnings multiple.
For a GARP investor, this price perspective is key. While not a low-price stock, Veeva's cost seems to fairly match its quality, growth path, and sector standing without including a high extra cost for uncertain future prospects.
Summary: A Characteristic Affordable Growth Example
Veeva Systems represents the ideas looked for by an Affordable Growth or GARP filter. It combines strong foundational health—top-level profit generation and a very secure, debt-free financial position—with a clear history and believable future of good high growth. The price, while not low in simple terms, is fair when considered against the company's quality, its growth potential, and its sector competitors. This fit suggests the market is acknowledging the company's worth without having pushed into excessive optimism.
For investors wanting to review other firms that fit similar standards of good growth, acceptable basic qualities, and fair price, more outcomes are available using the Affordable Growth stock filter. A complete look at Veeva's basic scores is in its full basic analysis report.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, an endorsement, or a recommendation to buy, sell, or hold any security. Investors should conduct their own research and consider their individual financial circumstances before making any investment decisions.
