Definition
GARP Investing
GARP (Growth at a Reasonable Price) is a hybrid style that seeks companies with solid growth but avoids overpaying for it.
GARP bridges value and growth: investors look for businesses growing steadily (often 15-25%) but trading at sensible valuations, frequently using the PEG ratio to ensure the price isn't too far ahead of growth. The aim is reliable compounding without the bubble risk of pure growth.
Popularised by Peter Lynch, GARP suits investors who want growth exposure with a valuation safety check. It avoids the extremes of overpriced glamour stocks and cheap-but-stagnant value traps.
Related terms
- PEG RatioThe PEG ratio divides the P/E ratio by the company's earnings growth rate, helping judge whether a high P/E is justified by fast growth.
- Value InvestingValue investing is a style of buying stocks that trade below their intrinsic worth, betting the market will eventually recognise their true value.
- Growth InvestingGrowth investing focuses on companies expected to grow earnings and revenue much faster than average, even if their valuations look expensive today.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.