Investors often face a trade-off between growth and value. High-growth companies tend to trade at lofty multiples, while cheap stocks frequently lack the momentum to expand earnings. The "Affordable Growth" strategy aims to bridge that gap by identifying companies that combine strong growth prospects with reasonable valuations, while also maintaining a baseline of financial health and profitability. By filtering for stocks with a ChartMill Growth rating above 7, a Valuation rating above 5, and decent scores for health and profitability, this screen is designed to surface candidates that may offer a "Growth At a Reasonable Price" (GARP) opportunity.
One stock that currently appears on this radar is WARRIOR MET COAL INC (NYSE:HCC), a producer and exporter of metallurgical coal used primarily in steelmaking. With an overall fundamental rating of 6 out of 10 from ChartMill, HCC presents a mixed but potentially attractive profile for the affordable growth investor.
Growth: The Core of the Case
The strongest pillar of the HCC thesis is its growth. ChartMill assigns HCC a Growth rating of 8 out of 10, a score that comfortably exceeds the screen's threshold of 7. This rating is driven by several factors. The company's earnings per share (EPS) expanded by an impressive 22.43% over the past year. More importantly, the future outlook is even more aggressive: EPS is expected to grow at an average rate of 105.49% annually over the next several years. Revenue is also on a strong trajectory, having grown 11.13% last year and projected to expand at over 20% annually going forward.
Crucially, the data shows that growth is accelerating. Both the EPS and revenue growth rates for the future are expected to outpace the averages of the recent past. For a strategy focused on affordability, this acceleration is a critical component—it suggests that the current valuation may soon look cheap if the projections materialize.
Valuation: Where Price Meets Growth Potential
The high headline P/E ratio of 32.12 might initially deter value-focused investors. However, the affordable growth screen digs deeper. HCC scores a Valuation rating of 5, which is a passing grade for the screen and indicates it is not unreasonably overpriced. The forward P/E ratio tells a very different story, standing at a much more reasonable 10.09. This forward-looking metric suggests that investors are not paying a premium for the coming earnings boom.
The result of this dynamic is a very attractive PEG (Price/Earnings to Growth) ratio. The PEG ratio compensates for growth, and HCC's low PEG ratio signals a rather cheap valuation relative to its expected earnings expansion. The company is also cheaper than roughly 60% of its industry peers based on the Enterprise Value to EBITDA multiple. For the affordable growth investor, this is the key takeaway: the market is offering a potentially high-growth earnings story at a forward valuation that is not yet priced for perfection.
Health and Profitability: The Supporting Pillars
While growth and valuation are the headline features, the strategy also requires decent health and profitability to ensure the company can execute on its plans. HCC scores a 5 on both the Health and Profitability ratings, which are marginal passes. These scores warrant caution but do not disqualify the stock.
On the health side, the company shows strong liquidity with a Current Ratio of 3.48 and a Quick Ratio of 2.42, meaning it can easily cover short-term obligations. Its Altman-Z score of 6.22 indicates little risk of bankruptcy. The negative check marks come from a rising debt-to-assets ratio and a recent trend of share count increases, which can dilute existing holders.
Profitability is similarly nuanced. While recent Return on Invested Capital (ROIC) has declined, the company has been consistently profitable over the past five years and generates positive operating cash flow. Its profit margin of 9.36% is above average for its industry peer group. For an affordable growth strategy, a profitability score of 6 is considered adequate—it confirms the company is making money, even if it isn't a cash-flow machine.
Full Fundamental Picture
For a complete breakdown of HCC's specific ratios and scores across the five pillars, you can review the full fundamental analysis report on ChartMill.
Finding More Opportunities
Warrior Met Coal is just one example of a stock that meets the affordable growth criteria. The screen used to find HCC filters for a ChartMill Growth rating above 7, a Valuation rating of 5 or higher, and minimum scores of 5 for both Health and Profitability.
This approach is designed to weed out both overhyped growth stocks and beaten-down value traps. By demanding growth acceleration and reasonable forward multiples, while still requiring baseline financial stability, it aims to identify companies with a clearer path to compounding shareholder value.
If you are interested in screening for similar candidates, you can access the full set of results from this affordable growth screen via the provided link.
View More Affordable Growth Stock Results
Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. All investment strategies and investments involve risk of loss. Readers should conduct their own independent research and consult with a qualified financial advisor before making any investment decisions.
Read full article here »
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Warrior Met Coal Inc (NYSE:HCC): A GARP Candidate with Accelerating Growth and a Forward P/E Under 11
Investors often face a trade-off between growth and value. High-growth companies tend to trade at lofty multiples, while cheap stocks frequently lack the momentum to expand earnings. The "Affordable Growth" strategy aims to bridge that gap by identifying companies that combine strong growth prospects with reasonable valuations, while also maintaining a baseline of financial health and profitability. By filtering for stocks with a ChartMill Growth rating above 7, a Valuation rating above 5, and decent scores for health and profitability, this screen is designed to surface candidates that may offer a "Growth At a Reasonable Price" (GARP) opportunity.
One stock that currently appears on this radar is WARRIOR MET COAL INC (NYSE:HCC), a producer and exporter of metallurgical coal used primarily in steelmaking. With an overall fundamental rating of 6 out of 10 from ChartMill, HCC presents a mixed but potentially attractive profile for the affordable growth investor.
Growth: The Core of the Case
The strongest pillar of the HCC thesis is its growth. ChartMill assigns HCC a Growth rating of 8 out of 10, a score that comfortably exceeds the screen's threshold of 7. This rating is driven by several factors. The company's earnings per share (EPS) expanded by an impressive 22.43% over the past year. More importantly, the future outlook is even more aggressive: EPS is expected to grow at an average rate of 105.49% annually over the next several years. Revenue is also on a strong trajectory, having grown 11.13% last year and projected to expand at over 20% annually going forward.
Crucially, the data shows that growth is accelerating. Both the EPS and revenue growth rates for the future are expected to outpace the averages of the recent past. For a strategy focused on affordability, this acceleration is a critical component—it suggests that the current valuation may soon look cheap if the projections materialize.
Valuation: Where Price Meets Growth Potential
The high headline P/E ratio of 32.12 might initially deter value-focused investors. However, the affordable growth screen digs deeper. HCC scores a Valuation rating of 5, which is a passing grade for the screen and indicates it is not unreasonably overpriced. The forward P/E ratio tells a very different story, standing at a much more reasonable 10.09. This forward-looking metric suggests that investors are not paying a premium for the coming earnings boom.
The result of this dynamic is a very attractive PEG (Price/Earnings to Growth) ratio. The PEG ratio compensates for growth, and HCC's low PEG ratio signals a rather cheap valuation relative to its expected earnings expansion. The company is also cheaper than roughly 60% of its industry peers based on the Enterprise Value to EBITDA multiple. For the affordable growth investor, this is the key takeaway: the market is offering a potentially high-growth earnings story at a forward valuation that is not yet priced for perfection.
Health and Profitability: The Supporting Pillars
While growth and valuation are the headline features, the strategy also requires decent health and profitability to ensure the company can execute on its plans. HCC scores a 5 on both the Health and Profitability ratings, which are marginal passes. These scores warrant caution but do not disqualify the stock.
On the health side, the company shows strong liquidity with a Current Ratio of 3.48 and a Quick Ratio of 2.42, meaning it can easily cover short-term obligations. Its Altman-Z score of 6.22 indicates little risk of bankruptcy. The negative check marks come from a rising debt-to-assets ratio and a recent trend of share count increases, which can dilute existing holders.
Profitability is similarly nuanced. While recent Return on Invested Capital (ROIC) has declined, the company has been consistently profitable over the past five years and generates positive operating cash flow. Its profit margin of 9.36% is above average for its industry peer group. For an affordable growth strategy, a profitability score of 6 is considered adequate—it confirms the company is making money, even if it isn't a cash-flow machine.
Full Fundamental Picture
For a complete breakdown of HCC's specific ratios and scores across the five pillars, you can review the full fundamental analysis report on ChartMill.
Finding More Opportunities
Warrior Met Coal is just one example of a stock that meets the affordable growth criteria. The screen used to find HCC filters for a ChartMill Growth rating above 7, a Valuation rating of 5 or higher, and minimum scores of 5 for both Health and Profitability.
This approach is designed to weed out both overhyped growth stocks and beaten-down value traps. By demanding growth acceleration and reasonable forward multiples, while still requiring baseline financial stability, it aims to identify companies with a clearer path to compounding shareholder value.
If you are interested in screening for similar candidates, you can access the full set of results from this affordable growth screen via the provided link.
View More Affordable Growth Stock Results
Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. All investment strategies and investments involve risk of loss. Readers should conduct their own independent research and consult with a qualified financial advisor before making any investment decisions.
Read full article here »