Five ‘GARP’ stocks for keen investors

GARP stands for growth at a reasonable price. This is the middle ground between value investing (buying what’s unpopular) and growth investing (looking for the next Nvidia).

I’m a dyed-in-the-wool value guy. But once a year in this column, I recommend a few GARP stocks.

To simplify the world, let’s say that value stocks generally sell for less than 15 times the company’s profits per share, or less. Growth stocks generally sell for 20 times earnings or more. In the middle, on GARP ground, are stocks selling for 16 to 19 times earnings.

Here are five GARP stocks I like now.

Cisco

Cisco Systems Inc. (CSCO), a computer-networking company, was one of the hottest growth stocks of the late 1990s. Now it’s a much more mature company, but still a good one in my opinion.

The company earned $2.82 a share in its latest fiscal year, ended in July. Analysts expect earnings to rise in the current year and the next two years after that, hitting $4.03 a share in fiscal 2025.

With that kind of growth, I’d expect this stock to sell for 20 times earnings or more, but in fact its multiple is 17. Tech stocks in general have been smashed this year, and I believe Cisco — down 23 percent year-to-date — is one of many stocks in the sector that are attractive now.

Texas Instruments

Another technology stock I like is Texas Instruments Inc. (TXN). Based in Dallas, the company is one of the largest semiconductor manufacturers in the world, and consistently

one of the most profitable.

It has earned at least 15 percent on stockholders’ equity in each of the past 15 years, and more than 30 percent in seven of those years. In the past four quarters, the figure was a towering 65 percent.

The stock sells for about 19 times earnings.

Stride

A mid-sized company that has grown fast is Stride Inc. (LRN), an online education company. During the pandemic, it served homebound students from kindergarten through high school seniors. With progress against COVID-19, that business is fading, but career education and adult education are growing.

The stock is at 17 times earnings.

Darling Ingredients

Darling collects and recycles various food waste materials such as used cooking oil and bakery remnants. It transforms these into animal feed, food ingredients such as gelatin and fertilizer. It has shown a profit in each of the past 15 years, and profits have accelerated lately.

The stock sells for 16 times earnings — but only 11 times the earnings

analysts expect in 2023.

Regeneron

Regeneron Pharmaceuticals Inc. (REGN), based in Tarrytown, New York, is a biotech company that already has several products on the market such as eye medication Eylea (about $9 billion per year in sales) and Regen-cov for COVID-19 (more than $7 billion).

Regeneron’s 10-year sales growth rate is about 30 percent per year. Considering that, I’d say the stock is modestly priced at a little over 15 times earnings.

The record

Last year’s column had the second-worst results in the entire series. All five of my selections declined, with an average loss of 29.96 percent. The worst performer was T. Rowe Price Group Inc., down 38 percent. For comparison, the S&P 500 was down 13.13 percent.

The Associated Press LM Otero Richardson, Texas-based Texas Instruments is consistently profitable.