The “Affordable Growth” approach is a strategy designed for investors seeking companies that combine solid growth with reasonable valuations, often referred to as Growth at a Reasonable Price (GARP). The method screens for stocks with a ChartMill Growth rating above 7, ensuring strong historical and expected expansion, along with a valuation score above 5 to avoid excessive premiums. It also requires decent profitability and health ratings (above 5), filtering out companies with weak financial foundations. This balance aims to capture stocks that are growing robustly but aren’t priced for perfection, potentially offering a margin of safety. Neurocrine Biosciences Inc (NASDAQ:NBIX) stands out as a current candidate from this screen, and its fundamentals align well with the strategy’s objectives.
Growth Metrics: Strong Past and Future Expansion
For the Affordable Growth strategy, growth is the centerpiece—stocks need a rating above 7 to qualify. NBIX earns an exceptional ChartMill Growth rating of 9 out of 10, reflecting both its recent performance and forward expectations. In the past year, earnings per share surged by 120%, while revenue climbed 28.59%—both well above industry averages. Over the last five years, EPS has grown at an average annual rate of 29.09%, and revenue at 22.29% , signaling consistent momentum.
Looking ahead, analysts project further strong expansion: EPS is expected to grow by 34.65% annually, and revenue by 14.75% . These figures confirm the company’s trajectory aligns with the strategy’s requirement for strong growth, not just in the rearview mirror but also on the horizon.
Valuation: Reasonable Price Amid Strong Growth
Valuation is the second pillar of the Affordable Growth screen, requiring a score above 5. NBIX scores 7 out of 10 on valuation, indicating it is not wildly overpriced despite its growth profile. While its trailing Price/Earnings ratio of 27.29 is above the S&P 500 average (26.98), it remains cheaper than 93.36% of peers in the Biotechnology industry. More importantly, the forward P/E of 18.36 is well below the industry’s average of 31.04 and the S&P 500’s 21.37, suggesting earnings growth is already being factored in at a discount.
The PEG ratio—which adjusts the P/E for earnings growth—is low, implying the stock is reasonably priced relative to its growth rate. Additionally, NBIX’s Enterprise Value/EBITDA and Price/Free Cash Flow ratios are both among the most attractive in its peer group, reinforcing that investors are not paying a premium for the company’s expansion. For a GARP strategy, this combination of high growth and relative valuation comfort is precisely what the screen targets.
Profitability and Health: Solid Financial Foundations
While growth and valuation are the headline criteria, the screen also demands decent profitability and health scores (above 5) to filter out riskier bets. NBIX delivers on both fronts:
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Profitability (rating 8/10): The company records a Return on Equity of 19.62% and Return on Invested Capital of 13.53%, both outperforming more than 94% of industry peers. Its gross margin is an impressive 98.17%, reflecting strong pricing power in its neuroscience-focused portfolio. Operating margin stands at 25.75%, also in the top tier. These metrics indicate that NBIX is not just growing—it’s doing so efficiently.
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Health (rating 7/10): Financially, NBIX is solid. It carries no debt, and its Altman-Z score of 9.00 indicates negligible bankruptcy risk—better than 79% of peers. The current ratio of 2.93 and quick ratio of 2.85 show ample liquidity to meet short-term obligations. Although the company has slightly increased share count over time, the debt-free balance sheet is a key strength for a growth stock, providing stability in uncertain markets.
Linking Back to the Strategy
The Affordable Growth screen is built on the premise that high-growth stocks can be mispriced due to market overreactions or sector dynamics. By demanding a valuation score above 5, it prevents chasing euphoria—and NBIX’s relative cheapness compared to its industry supports this. Its profitability and health ratings further reduce the likelihood of a value trap, ensuring the growth is backed by operational excellence. For a more detailed look at the specific data, see the full fundamental analysis report for NBIX.
Try the Screen Yourself
Interested in finding more stocks with similar characteristics? The same Affordable Growth screen can be applied to the entire market. You can access the live screening results here to explore other candidates that meet the criteria.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always conduct your own research or consult a financial advisor before making investment decisions.
Read full article here »
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Neurocrine Biosciences Inc (NASDAQ:NBIX) Scores High in Affordable Growth Screen
The “Affordable Growth” approach is a strategy designed for investors seeking companies that combine solid growth with reasonable valuations, often referred to as Growth at a Reasonable Price (GARP). The method screens for stocks with a ChartMill Growth rating above 7, ensuring strong historical and expected expansion, along with a valuation score above 5 to avoid excessive premiums. It also requires decent profitability and health ratings (above 5), filtering out companies with weak financial foundations. This balance aims to capture stocks that are growing robustly but aren’t priced for perfection, potentially offering a margin of safety. Neurocrine Biosciences Inc (NASDAQ:NBIX) stands out as a current candidate from this screen, and its fundamentals align well with the strategy’s objectives.
Growth Metrics: Strong Past and Future Expansion
For the Affordable Growth strategy, growth is the centerpiece—stocks need a rating above 7 to qualify. NBIX earns an exceptional ChartMill Growth rating of 9 out of 10, reflecting both its recent performance and forward expectations. In the past year, earnings per share surged by 120%, while revenue climbed 28.59%—both well above industry averages. Over the last five years, EPS has grown at an average annual rate of 29.09%, and revenue at 22.29% , signaling consistent momentum.
Looking ahead, analysts project further strong expansion: EPS is expected to grow by 34.65% annually, and revenue by 14.75% . These figures confirm the company’s trajectory aligns with the strategy’s requirement for strong growth, not just in the rearview mirror but also on the horizon.
Valuation: Reasonable Price Amid Strong Growth
Valuation is the second pillar of the Affordable Growth screen, requiring a score above 5. NBIX scores 7 out of 10 on valuation, indicating it is not wildly overpriced despite its growth profile. While its trailing Price/Earnings ratio of 27.29 is above the S&P 500 average (26.98), it remains cheaper than 93.36% of peers in the Biotechnology industry. More importantly, the forward P/E of 18.36 is well below the industry’s average of 31.04 and the S&P 500’s 21.37, suggesting earnings growth is already being factored in at a discount.
The PEG ratio—which adjusts the P/E for earnings growth—is low, implying the stock is reasonably priced relative to its growth rate. Additionally, NBIX’s Enterprise Value/EBITDA and Price/Free Cash Flow ratios are both among the most attractive in its peer group, reinforcing that investors are not paying a premium for the company’s expansion. For a GARP strategy, this combination of high growth and relative valuation comfort is precisely what the screen targets.
Profitability and Health: Solid Financial Foundations
While growth and valuation are the headline criteria, the screen also demands decent profitability and health scores (above 5) to filter out riskier bets. NBIX delivers on both fronts:
Profitability (rating 8/10): The company records a Return on Equity of 19.62% and Return on Invested Capital of 13.53%, both outperforming more than 94% of industry peers. Its gross margin is an impressive 98.17%, reflecting strong pricing power in its neuroscience-focused portfolio. Operating margin stands at 25.75%, also in the top tier. These metrics indicate that NBIX is not just growing—it’s doing so efficiently.
Health (rating 7/10): Financially, NBIX is solid. It carries no debt, and its Altman-Z score of 9.00 indicates negligible bankruptcy risk—better than 79% of peers. The current ratio of 2.93 and quick ratio of 2.85 show ample liquidity to meet short-term obligations. Although the company has slightly increased share count over time, the debt-free balance sheet is a key strength for a growth stock, providing stability in uncertain markets.
Linking Back to the Strategy
The Affordable Growth screen is built on the premise that high-growth stocks can be mispriced due to market overreactions or sector dynamics. By demanding a valuation score above 5, it prevents chasing euphoria—and NBIX’s relative cheapness compared to its industry supports this. Its profitability and health ratings further reduce the likelihood of a value trap, ensuring the growth is backed by operational excellence. For a more detailed look at the specific data, see the full fundamental analysis report for NBIX.
Try the Screen Yourself
Interested in finding more stocks with similar characteristics? The same Affordable Growth screen can be applied to the entire market. You can access the live screening results here to explore other candidates that meet the criteria.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always conduct your own research or consult a financial advisor before making investment decisions.
Read full article here »