Scoop Up These 4 GARP Stocks to Receive Handsome Returns

If you are looking for a profitable portfolio of stocks offering the best of value and growth investing, try the growth at a reasonable price or GARP strategy.

The strategy helps investors gain exposure to undervalued stocks with impressive prospects. Unlike a blend strategy, a portfolio that uses GARP investing is expected to include stocks that offer the best of value and growth investing. Sprouts Farmers Market SFM, Adobe ADBE, GE Aerospace GE and ResMed RMD are some GARP stocks that hold promise.

GARP Metrics: Mix of Growth & Value Metrics

The GARP strategy seeks to offer an ideal investment by utilizing the best features of value and growth investing. Investors adopting the GARP approach prefer buying stocks priced below the market or any reasonable target determined by fundamental analysis. These stocks also have solid prospects in terms of cash flow, revenues, earnings per share (EPS) and so on.

Growth Metrics

A strong earnings growth history and impressive earnings prospects are the main concepts that GARP investors borrow from the growth investing strategy. However, instead of super-normal growth rates, pursuing stocks with a more stable and reasonable growth rate is a tactic of GARP investors. Hence, growth rates between 10% and 20% are considered ideal under the GARP strategy.

Another metric that growth and GARP investors consider is return on equity (ROE). GARP investors look for a strong and higher ROE than the industry average to identify superior stocks. Stocks with positive cash flows find precedence under the GARP plan.

Value Metrics

GARP investing prioritizes the popular value metrics — the price-to-earnings (P/E) and price-to-book (P/B) ratios. Though this investing style picks stocks with higher P/E ratios than value investors, it avoids companies with extremely high P/E ratios.

Using the GARP principle, we ran a screen to identify stocks that should offer solid returns in the near term.

Screening Parameters

Along with the criteria discussed in the above section, we have considered a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Last 5-year EPS & projected 3-5-year EPS growth rates between 10% and 25% (Strong EPS growth history and prospects ensure improving business.)

ROE (over the past 12 months) greater than the industry average (Higher ROE than the industry average indicates superior stocks.)

P/E and P/B ratios less than the M-industry average (P/E and P/B ratios less than that of the industry indicate that the stocks are undervalued.)

Here are four stocks from the eight that made it through the screening process:

Sprouts Farmers Market’s commitment to providing fresh produce and health-oriented products aligns with increasing consumer demand for healthier food options. The overall market for natural and organic food at home, which SFM targets, is estimated to be around $290 billion within the total $1.6 trillion spent on food at home. Its private-label products continue to gain traction, accounting for 24% of total sales, with 300 new items launched last year, fostering customer loyalty. 

Sprouts Farmers plans to open at least 35 new stores in 2025, targeting approximately 10%-unit growth, supported by a robust pipeline of 120 approved sites and more than 85 signed leases. Embracing a multi-channel approach, Sprouts Farmers continues to adapt to shifting consumer shopping habits. Significant investments in digital infrastructure, online ordering and delivery services have enhanced customer accessibility.

This Zacks Rank #1 stock has returned 31% in the year-to-date period. It has a trailing four-quarter earnings surprise of 16.5%, on average. The Zacks Consensus Estimate for SFM’s 2025 earnings has remained steady at $5.08 per share over the past 30 days. You can see the complete list of today's Zacks #1 Rank stocks here.

Adobe’s tools, like Acrobat AI Assistant and Adobe Express, are attracting business professionals and creators. Acrobat AI Assistant uses conversational interfaces to make it easier for users to read digital documents and gain insights within a short timeframe. Adobe Express is using AI to enable consumers to quickly design and publish content through conversational AI in an easy-to-use, all-in-one application. Adobe’s monthly active users across these categories surpassed more than 700 million users at the end of the second quarter of fiscal 2025. 

The Firefly App is attracting users for AI-powered content ideation, creation and production, and its support for third-party models, including from Alphabet division Google’s Imagen and Veo, Microsoft-backed OpenAI’s image generation and Black Forest Labs’ Flux. Adobe Firefly App availability on mobile is expected to further boost its popularity.

This Zacks Rank #2 stock has declined 14% in the year-to-date period. It has a trailing four-quarter earnings surprise of 2.53%, on average. The Zacks Consensus Estimate for ADBE’s fiscal 2025 earnings has moved north by 1.2% to $20.6 per share over the past 30 days.

GE Aerospace is a leading designer, developer and producer of jet engines, components and integrated systems for military, commercial and business aircraft. The company is well-known for its aero-derivative gas turbines for marine applications.

GE Aerospace has been witnessing strength in its businesses, driven by robust demand for commercial engines, propulsion and additive technologies. Rising U.S. & international defense budgets, geopolitical tensions, positive airline & airframer dynamics and robust demand for commercial air travel augur well for the company. Its portfolio-reshaping actions are likely to unlock value for its shareholders. For 2025, GE Aerospace expects organic revenues to grow in the low double-digit range from the year-ago level.

This Zacks Rank #2 stock has surged 49.1% in the year-to-date period. It has a trailing four-quarter earnings surprise of 17.97%, on average. The Zacks Consensus Estimate for GE’s 2025 earnings has moved north by 0.2% to $5.51 per share over the past 30 days.

Resmed holds a major position as designer, manufacturer, as well as a distributor in the worldwide market for generators, masks, and related accessories for the treatment of sleep-disordered breathing and other respiratory disorders.  The company has successfully introduced a full suite of masks in its AirFit, AirTouch and other ranges. Further, to promote greater patient adherence, Resmed offers advanced and expanded integrations of its therapy-based software solutions, including AirView. The company’s AirFit F40 is performing extremely well in the U.S. market.

The company’s two key global customer-facing software products — AirView and myAir — are 100% in the cloud. Currently, Resmed is investing in a portfolio of artificial intelligence-driven capabilities, as well as customer-facing AI products in its ecosystem. The company has continued to roll out these products in its AirView ecosystem, such as Compliance Coach in the United States. These AI-driven data products will provide personalized suggestions to increase patient therapy adherence and ultimately improve patient outcomes.

This Zacks Rank #2 stock has returned 11.9% in the year-to-date period. It has a trailing four-quarter earnings surprise of 4.23%, on average. The Zacks Consensus Estimate for RMD’s fiscal 2025 earnings has remained steady at $9.48 per share over the past 30 days.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks' portfolios and strategies are available at: https://www.zacks.com/performance.

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