Investors looking for a disciplined way to find quality stocks that balance growth with value often turn to the principles laid out by legendary fund manager Peter Lynch. In his book One Up on Wall Street, Lynch championed a "Growth at a Reasonable Price" (GARP) approach, favoring companies with sustainable earnings growth, strong financial health, and reasonable valuations. The strategy is straightforward: seek out businesses that are growing at a steady clip—not too fast to be unsustainable, but fast enough to generate meaningful returns—while ensuring they aren’t overpriced. Lynch famously avoided high-flying, speculative stocks, preferring instead to invest in what he understood, often from everyday life. After running a stock screener based on Lynch’s specific criteria, one company that consistently ticks these boxes is Mueller Water Products Inc-A (NYSE:MWA), a manufacturer of water infrastructure products that plays a vital role in a decidedly unglamorous but essential industry.
Meeting the Lynch Criteria
Lynch’s screen is designed to filter for companies that combine moderate growth with strong fundamentals and low debt. Mueller Water Products not only passes each test but does so with room to spare, making it a textbook candidate.
Earnings Growth That’s ‘Just Right’
Lynch looked for companies with an EPS 5-year growth rate between 15% and 30%. Growth much slower doesn’t move the needle, while anything faster is often unsustainable. Mueller Water Products reports a 20.76% average annual EPS growth over the past five years, landing squarely in Lynch’s “sweet spot.” This is not a flash-in-the-pan story; it reflects steady, compounding improvement in profitability.
Reasonable Valuation with a Low PEG
A pure growth stock can be dangerously overpriced. Lynch’s solution is the PEG ratio (Price/Earnings divided by growth), which he insisted be below 1.0. Mueller Water Products has a PEG ratio of just 0.92. This means investors are paying less than the company’s growth rate for each dollar of earnings, a classic sign of undervaluation relative to its earnings trajectory. It suggests the market hasn’t fully priced in the company’s potential.
Prudent Use of Debt
Lynch was wary of companies drowning in debt. He set a Debt-to-Equity ratio limit of 0.6 and preferred it even lower. Mueller Water Products has a Debt/Equity ratio of 0.42, easily clearing this hurdle. The company is funded more by equity than by debt, reducing financial risk and ensuring that earnings growth isn’t artificially juiced by leverage.
Solid Short-Term Financial Health
To avoid companies with cash flow crunches, Lynch required a Current Ratio of at least 1.0, meaning current assets must cover current liabilities. Mueller Water Products achieves a 4.57 Current Ratio, a figure that places it in the top tier of its industry. This is a clear signal that the company has ample liquidity to meet its near-term obligations and handle economic bumps.
High Return on Equity (ROE)
Finally, Lynch demanded a Return on Equity above 15% as proof of efficient profitability. Mueller Water Products delivers an ROE of 19.37%, outperforming more than 87% of its peers in the Machinery industry. This indicates the company is effectively generating profit from its shareholders' capital, a hallmark of a well-run business.
A Deep Examination: Fundamental Report Summary
Beyond the Lynch screen, the broader picture painted by the company’s fundamentals reinforces the thesis. According to our detailed fundamental report, Mueller Water Products earns a rating of 7 out of 10.
The company scores a 9/10 on Profitability, with high margins and strong returns on assets, equity, and invested capital. Its Health score is 8/10, driven by strong solvency and exceptional liquidity ratios. The Valuation (5/10) is fair, trading at a P/E of 19.13, which is actually cheaper than the vast majority of its industry peers. Growth scores a 5/10, reflecting a notable deceleration expected in future years, which is a common reality for maturing GARP companies but one to monitor.
For a complete breakdown of every ratio and metric, you can view the full fundamental report here.
Why This Matters for Long-Term Investors
Lynch believed that over a 10- to 20-year horizon, the price of a well-chosen stock will eventually reflect its underlying earnings power. The criteria used here are not arbitrary—they are designed to identify companies that can compound value over the long term without the risk of financial distress or overvaluation. Mueller Water Products fits this mold: it operates in a necessary sector (water infrastructure), generates strong cash flow, grows earnings at a healthy clip, and remains reasonably priced. It is precisely the kind of "dull but dependable" business that Lynch would have dug into, bought, and held.
Discover More Opportunities
Mueller Water Products is just one example of how the Peter Lynch strategy can uncover interesting investment candidates. If you are looking for more companies that combine sustainable growth with strong value and healthy balance sheets, you can explore the full list of results from the Peter Lynch screen at the link below.
Ready to find your own GARP stocks? Check out the pre-built Peter Lynch Screen here and run your own analysis.
Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. Past performance and screening results are not guarantees of future returns. Always conduct your own due diligence or consult with a qualified financial advisor before making any investment decisions.
Read full article here »
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Mueller Water Products Inc-A (NYSE:MWA): A Peter Lynch GARP Stock with a PEG Below 1.0
Investors looking for a disciplined way to find quality stocks that balance growth with value often turn to the principles laid out by legendary fund manager Peter Lynch. In his book One Up on Wall Street, Lynch championed a "Growth at a Reasonable Price" (GARP) approach, favoring companies with sustainable earnings growth, strong financial health, and reasonable valuations. The strategy is straightforward: seek out businesses that are growing at a steady clip—not too fast to be unsustainable, but fast enough to generate meaningful returns—while ensuring they aren’t overpriced. Lynch famously avoided high-flying, speculative stocks, preferring instead to invest in what he understood, often from everyday life. After running a stock screener based on Lynch’s specific criteria, one company that consistently ticks these boxes is Mueller Water Products Inc-A (NYSE:MWA), a manufacturer of water infrastructure products that plays a vital role in a decidedly unglamorous but essential industry.
Meeting the Lynch Criteria
Lynch’s screen is designed to filter for companies that combine moderate growth with strong fundamentals and low debt. Mueller Water Products not only passes each test but does so with room to spare, making it a textbook candidate.
Earnings Growth That’s ‘Just Right’ Lynch looked for companies with an EPS 5-year growth rate between 15% and 30%. Growth much slower doesn’t move the needle, while anything faster is often unsustainable. Mueller Water Products reports a 20.76% average annual EPS growth over the past five years, landing squarely in Lynch’s “sweet spot.” This is not a flash-in-the-pan story; it reflects steady, compounding improvement in profitability.
Reasonable Valuation with a Low PEG A pure growth stock can be dangerously overpriced. Lynch’s solution is the PEG ratio (Price/Earnings divided by growth), which he insisted be below 1.0. Mueller Water Products has a PEG ratio of just 0.92. This means investors are paying less than the company’s growth rate for each dollar of earnings, a classic sign of undervaluation relative to its earnings trajectory. It suggests the market hasn’t fully priced in the company’s potential.
Prudent Use of Debt Lynch was wary of companies drowning in debt. He set a Debt-to-Equity ratio limit of 0.6 and preferred it even lower. Mueller Water Products has a Debt/Equity ratio of 0.42, easily clearing this hurdle. The company is funded more by equity than by debt, reducing financial risk and ensuring that earnings growth isn’t artificially juiced by leverage.
Solid Short-Term Financial Health To avoid companies with cash flow crunches, Lynch required a Current Ratio of at least 1.0, meaning current assets must cover current liabilities. Mueller Water Products achieves a 4.57 Current Ratio, a figure that places it in the top tier of its industry. This is a clear signal that the company has ample liquidity to meet its near-term obligations and handle economic bumps.
High Return on Equity (ROE) Finally, Lynch demanded a Return on Equity above 15% as proof of efficient profitability. Mueller Water Products delivers an ROE of 19.37%, outperforming more than 87% of its peers in the Machinery industry. This indicates the company is effectively generating profit from its shareholders' capital, a hallmark of a well-run business.
A Deep Examination: Fundamental Report Summary
Beyond the Lynch screen, the broader picture painted by the company’s fundamentals reinforces the thesis. According to our detailed fundamental report, Mueller Water Products earns a rating of 7 out of 10.
The company scores a 9/10 on Profitability, with high margins and strong returns on assets, equity, and invested capital. Its Health score is 8/10, driven by strong solvency and exceptional liquidity ratios. The Valuation (5/10) is fair, trading at a P/E of 19.13, which is actually cheaper than the vast majority of its industry peers. Growth scores a 5/10, reflecting a notable deceleration expected in future years, which is a common reality for maturing GARP companies but one to monitor.
Why This Matters for Long-Term Investors
Lynch believed that over a 10- to 20-year horizon, the price of a well-chosen stock will eventually reflect its underlying earnings power. The criteria used here are not arbitrary—they are designed to identify companies that can compound value over the long term without the risk of financial distress or overvaluation. Mueller Water Products fits this mold: it operates in a necessary sector (water infrastructure), generates strong cash flow, grows earnings at a healthy clip, and remains reasonably priced. It is precisely the kind of "dull but dependable" business that Lynch would have dug into, bought, and held.
Discover More Opportunities
Mueller Water Products is just one example of how the Peter Lynch strategy can uncover interesting investment candidates. If you are looking for more companies that combine sustainable growth with strong value and healthy balance sheets, you can explore the full list of results from the Peter Lynch screen at the link below.
Ready to find your own GARP stocks? Check out the pre-built Peter Lynch Screen here and run your own analysis.
Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. Past performance and screening results are not guarantees of future returns. Always conduct your own due diligence or consult with a qualified financial advisor before making any investment decisions.
Read full article here »