Meta Platforms Inc (NASDAQ:[META](https://www.chartmill.com/stock/quote/META/overview)): A GARP Investment Opportunity
By Mill Chart
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Growth at a reasonable price (GARP) investing combines elements of both growth and value investing. Unlike pure growth strategies that chase high-flying stocks regardless of valuation, GARP focuses on companies with strong earnings growth that trade at reasonable prices. Meta Platforms Inc (NASDAQ:META) stands out as a potential candidate for this approach, balancing solid growth metrics with reasonable valuations.
Why Meta Platforms Fits the GARP Criteria
Strong Earnings Growth
Meta Platforms has demonstrated consistent earnings growth, with a 5-year average EPS growth of 22.82%, comfortably within the 15-30% range that Peter Lynch favored for sustainable growth. This signals a company expanding profitability without overheating.
Reasonable Valuation
While Meta's PEG ratio (5Y) of 3.23 is above the ideal threshold of 1, its forward P/E of 18.81 is below the S&P 500 average (21.20), suggesting a relatively fair valuation given its growth prospects. Additionally, its enterprise value to EBITDA ratio is cheaper than 67.14% of its industry peers, reinforcing its appeal for value-conscious investors.
Financial Health and Profitability
Meta maintains a strong balance sheet with:
- Debt/Equity ratio of 0.16, well below the 0.6 threshold Lynch recommended.
- Current ratio of 2.98, indicating ample liquidity to cover short-term obligations.
- Return on Equity (ROE) of 34.14%, placing it in the top 3% of its industry.
Future Growth Prospects
Analysts project Meta's EPS and revenue to grow at 12.09% and 12.05% annually, respectively. While slower than past growth, this remains robust compared to many peers.
Fundamental Analysis Summary
Our fundamental analysis report rates Meta Platforms at 7 out of 10, highlighting:
- High profitability (ROE 34.14%, ROIC 24.88%).
- Strong financial health (low debt, high liquidity).
- Reasonable valuation relative to growth and industry peers.
For investors seeking a blend of growth and value, Meta Platforms presents a compelling case.
