The "Affordable Growth" screen is designed for investors seeking a sweet spot that often proves elusive: companies that are growing their earnings and revenue at an above-average clip but haven't yet been bid up to excessive valuations by the market. This approach, often referred to as Growth at a Reasonable Price (GARP), aims to filter out both value traps (cheap stocks with no growth prospects) and high-flying growth stocks that may be priced for perfection. By requiring a minimum ChartMill Growth rating of 7 and a Valuation rating above 5, along with decent scores for Health and Profitability, the screen targets businesses with solid underlying fundamentals that aren't being sacrificed for expansion. Gold Fields Ltd - Spon ADR (NYSE:GFI) emerged from this specific screen, and its recent fundamental report suggests it ticks nearly every box for an affordable growth story.
Growth in Overdrive
The primary filter for this GARP screen is strong growth, and GFI does not disappoint. The company scores a strong 8 out of 10 on the ChartMill Growth rating, backed by strong historical and forward-looking data.
- Stellar Past Performance: Earnings Per Share (EPS) grew by an impressive 185.62% over the past year, building on a strong 5-year average annual growth rate of 37.45%. Revenue growth has been similarly powerful, with a 68.24% jump in the last year and a solid 5-year average of 17.59%.
- Future Momentum Continues: Looking ahead, the growth narrative remains intact. Analysts expect EPS to grow by 21.89% annually in the coming years, while revenue is projected to increase by 15.06% per year.
This level of growth is what makes GFI an attractive candidate for a GARP strategy. The screen specifically looks for companies that are not just growing, but doing so at a pace that can drive significant shareholder value over time.
Valuation: The "Reasonable Price" Component
The second, equally critical pillar of the Affordable Growth screen is valuation. A company can have fantastic growth, but if the market has priced it in perfectly, the stock could be a poor investment. Here, GFI shines with a near-perfect Valuation rating of 9 out of 10.
- Undemanding Multiples: The stock trades at a Price/Earnings (PE) ratio of just 9.97. This is significantly cheaper than 94.41% of its peers in the Metals & Mining industry and less than half the current S&P 500 average of 26.94.
- Forward Looking: The valuation argument gets even stronger when looking at forward earnings. With a Price/Forward Earnings ratio of 6.37, the stock is priced for a very different reality than its current earnings trajectory suggests. This is a hallmark of the "value" side of the GARP equation.
- Compensation for Growth: The PEG Ratio, which divides the PE ratio by the earnings growth rate, indicates that the market is not fully pricing in GFI's growth potential. This creates the exact scenario the screen is designed to capture: paying a reasonable price for a company that is likely to be worth more in the future.
The screen’s requirement for a Valuation score above 5 is designed to avoid the most speculative corners of the market. At its current metrics, GFI is not just meeting the criteria; it is decisively under-priced relative to its own growth, fitting the GARP profile almost perfectly.
Profitability and Health: The Quality Backstop
A cheap, fast-growing company is only a good investment if it has the operational quality to sustain that growth. This is where the Health and Profitability filters become crucial, and GFI scores highly here as well (Profitability: 9, Health: 7).
- Profitability Powerhouse: The company's margins are exceptional. An Operating Margin of 57.94% and a Gross Margin of 57.94% are among the highest in the industry. This translates into a Return on Equity (ROE) of 42.25% and a Return on Assets (ROA) of 23.40%, both of which outperform more than 98% of industry peers.
- Solid Financial Health: Financially, GFI is on solid footing. It has an Altman-Z score of 5.52, indicating a very low probability of bankruptcy, and a very manageable Debt to Free Cash Flow ratio of 1.37—meaning it could pay off all its debt in just over a year if it chose to. While its Current and Quick ratios are slightly below some peers, this is offset by excellent solvency and profitability.
For a GARP strategy, this high level of profitability is essential. It suggests that GFI’s growth is not being funded by debt or by selling products at a loss—it is organic, profitable growth that can be sustained for the long term. The solid health rating acts as a safety net, ensuring that the company can weather operational and market cycles without financial distress.
Analyst Views
Based on the fundamental data, the outlook appears favorable. The combination of single-digit PE ratios and double-digit earnings growth rates is rare and is typically a strong signal that a stock may be undervalued. The strong margins and solid balance sheet provide confidence that the company has the operational and financial capacity to meet its forward-looking growth targets.
Summary
Gold Fields (GFI) presents a textbook case for an affordable growth investment. It combines explosive past and future growth with a valuation that the market seems to have overlooked, all supported by industry-leading profitability and a solid financial foundation. Investors looking for a GARP candidate can review the full details of the fundamental analysis report here. For those who want to run this specific "Affordable Growth" screen to find more opportunities like GFI, you can access the screening parameters and results directly here.
Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. The analysis provided is based on the fundamental data shown in the article and does not take into account an individual's specific financial situation or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making any investment decisions.
Read full article here »
View the Zacks #1 Rank List
Gold Fields Ltd (NYSE:GFI) Offers a Textbook GARP Opportunity
The "Affordable Growth" screen is designed for investors seeking a sweet spot that often proves elusive: companies that are growing their earnings and revenue at an above-average clip but haven't yet been bid up to excessive valuations by the market. This approach, often referred to as Growth at a Reasonable Price (GARP), aims to filter out both value traps (cheap stocks with no growth prospects) and high-flying growth stocks that may be priced for perfection. By requiring a minimum ChartMill Growth rating of 7 and a Valuation rating above 5, along with decent scores for Health and Profitability, the screen targets businesses with solid underlying fundamentals that aren't being sacrificed for expansion. Gold Fields Ltd - Spon ADR (NYSE:GFI) emerged from this specific screen, and its recent fundamental report suggests it ticks nearly every box for an affordable growth story.
Growth in Overdrive
The primary filter for this GARP screen is strong growth, and GFI does not disappoint. The company scores a strong 8 out of 10 on the ChartMill Growth rating, backed by strong historical and forward-looking data.
This level of growth is what makes GFI an attractive candidate for a GARP strategy. The screen specifically looks for companies that are not just growing, but doing so at a pace that can drive significant shareholder value over time.
Valuation: The "Reasonable Price" Component
The second, equally critical pillar of the Affordable Growth screen is valuation. A company can have fantastic growth, but if the market has priced it in perfectly, the stock could be a poor investment. Here, GFI shines with a near-perfect Valuation rating of 9 out of 10.
The screen’s requirement for a Valuation score above 5 is designed to avoid the most speculative corners of the market. At its current metrics, GFI is not just meeting the criteria; it is decisively under-priced relative to its own growth, fitting the GARP profile almost perfectly.
Profitability and Health: The Quality Backstop
A cheap, fast-growing company is only a good investment if it has the operational quality to sustain that growth. This is where the Health and Profitability filters become crucial, and GFI scores highly here as well (Profitability: 9, Health: 7).
For a GARP strategy, this high level of profitability is essential. It suggests that GFI’s growth is not being funded by debt or by selling products at a loss—it is organic, profitable growth that can be sustained for the long term. The solid health rating acts as a safety net, ensuring that the company can weather operational and market cycles without financial distress.
Analyst Views
Based on the fundamental data, the outlook appears favorable. The combination of single-digit PE ratios and double-digit earnings growth rates is rare and is typically a strong signal that a stock may be undervalued. The strong margins and solid balance sheet provide confidence that the company has the operational and financial capacity to meet its forward-looking growth targets.
Summary
Gold Fields (GFI) presents a textbook case for an affordable growth investment. It combines explosive past and future growth with a valuation that the market seems to have overlooked, all supported by industry-leading profitability and a solid financial foundation. Investors looking for a GARP candidate can review the full details of the fundamental analysis report here. For those who want to run this specific "Affordable Growth" screen to find more opportunities like GFI, you can access the screening parameters and results directly here.
Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. The analysis provided is based on the fundamental data shown in the article and does not take into account an individual's specific financial situation or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making any investment decisions.
Read full article here »