Growth at a reasonable price, or GARP, is an excellent strategy to earn quick investment profits. The GARP approach helps identify stocks priced below the market or any suitable target determined by a fundamental analysis.

The strategy helps investors gain exposure to stocks with impressive prospects and trading at a discount. GARP stocks have solid prospects in terms of cash flow, revenues, earnings per share (EPS) and other metrics.

A portfolio based on the GARP strategy comprises stocks that offer the best value and growth investment. Nvidia NVDA, Cencora, Inc. COR, Jabil JBL and KLA Corporation KLAC are some promising GARP stocks.

GARP Metrics — Mix of Growth & Value Metrics

The GARP strategy offers ideal investment options utilizing the best value and growth investing features. Investors adopting the GARP approach prefer stocks priced below the market or any reasonable target determined by fundamental analysis. The stocks have solid prospects based on cash flow, revenues, EPS, etc.

Growth Metrics

A strong earnings growth history and impressive earnings prospects are the primary concepts that GARP investors borrow from the growth investing strategy. However, instead of super-normal rates, pursuing stocks with a more stable and reasonable growth rate is a tactic of GARP investors. The GARP strategy considers growth rates between 10% and 20% ideal.

Another metric considered by growth and GARP investors is return on equity (ROE). GARP investors look for strong and higher ROE than the industry average to identify superior stocks. Moreover, stocks with a positive cash flow find precedence under the GARP plan.

Value Metrics

GARP investing prioritizes one of the popular value metrics — the price-to-earnings (P/E) ratio. The investing style picks stocks with higher P/E ratios than value investors but it avoids companies with extremely high P/E ratios. The price-to-book value (P/B) ratio is also taken into consideration.

Using the GARP principle, we have run a screen to identify stocks that should offer solid returns in the near term.

Screening Parameters

Along with the criteria discussed in the above section, we have considered a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Last five-year EPS & projected 3-5-year EPS growth rates between 10% and 25% (Strong EPS growth history and prospects ensure improving business.)

ROE (in the past 12 months) greater than the industry average (Higher ROE than the industry average indicates superior stocks.)

P/E and P/B ratios are less than the M-industry average (P/E and P/B ratios less than the industry indicate that the stocks are undervalued.)

Here are the four stocks out of the 12 that made it through the screen, each carrying a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here. 

Nvidia is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit or GPU. Over the years, the company’s focus has evolved from PC graphics to artificial intelligence (AI)-based solutions that now support high performance computing (HPC), gaming and virtual reality (VR) platforms.

The growing demand for generative AI and large language models using GPUs based on NVIDIA’s Hopper and Blackwell architectures is aiding data center revenues. The continued ramp-up of Ada RTX GPU workstations in the ProViz end market following the normalization of channel inventory is acting as a tailwind. Collaborations with more than 320 automakers and tier-one suppliers are likely to advance its presence in the autonomous vehicles space. 

Nvidia has rallied 33.8% in the past year. It has a trailing four-quarter earnings surprise of 7.92%, on average. The Zacks Consensus Estimate for NVDA’s fiscal 2026 earnings has moved north by 4.3% to $4.39 per share over the past 30 days.

Cencora is one of the world’s largest pharmaceutical service companies. It focuses on providing drug distribution and related services to reduce healthcare costs and improve patient outcomes. The company is well-positioned to deliver long-term sustainable growth due to its diverse and inclusive teams.

Cencora is an ideal partner for manufacturers looking to launch products. This is due to its extensive worldwide distribution network and global platform of commercialization services. Thanks to its growing presence in the pharmaceutical industry, Cencora can establish partnerships with pharmaceutical companies at an early stage of product development and market itself as an integrated partner capable of assisting in the successful commercialization of its products (in addition to providing logistics and distribution services). These factors are likely to have favored the stock’s growth.

Cencora has risen 7.7% in the past year. It has a trailing four-quarter earnings surprise of 4.94%, on average. The Zacks Consensus Estimate for COR’s fiscal 2025 earnings has moved north by 0.5% to $15.36 per share over the past 30 days.

Jabil, Inc. is one of the largest global suppliers of electronic manufacturing services. The company offers electronics design, production, product management and after-market services to customers in the aerospace, automotive, computing, consumer, defense, industrial, instrumentation, medical, networking, peripherals, storage and telecommunications industries.

Jabil has an established global presence and a worldwide connected factory network, enabling it to scale production per the evolving market dynamics. Strong performance in healthcare, automotive and transportation, coupled with growth in 5G, is expected to boost the top line. A higher free cash flow indicates optimum utilization of assets and improved operational efficiency. Management’s focus on integrating advanced AI and ML capabilities is a tailwind.

Jabil has jumped 10% in the past year. It has a trailing four-quarter earnings surprise of 3.52%, on average. The Zacks Consensus Estimate for JBL’s fiscal 2025 earnings has remained steady at $8.78 per share over the past 30 days.

KLA Corporation is an original equipment manufacturer (OEM) of process diagnostics and control (PDC) equipment and yield management solutions required for the fabrication of semiconductor integrated circuits or chips. 

Despite facing challenges from new U.S. export controls, KLA is benefiting from strong demand for high bandwidth memory and advanced packaging solutions. Also, the expansion of AI, HPC and DRAM investments continues to fuel demand for high-performance and advanced packaging. There are many technology transitions (FinFET, 3D NAND, TSV and multi-patterning) that will drive KLA’s demand in the following quarters. The demand for greater densities and efficiencies within chip packages is increasing the complexities of semiconductor devices, which will continue to drive demand for yield management solutions.

KLA Corporation has risen 5.5% in the past year. It has a trailing four-quarter earnings surprise of 6.35%, on average. The Zacks Consensus Estimate for KLAC’s fiscal 2025 earnings has remained steady at $31.59 per share over the past 30 days.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks' portfolios and strategies are available at: https://www.zacks.com/performance.

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