GARP Screening Calculator
GARP Investment Screening Tool
Determine if a stock meets the Growth at a Reasonable Price criteria using fundamental metrics from the article. Enter your stock's data to check if it's a potential GARP investment.
PEG Ratio = P/E Ratio ÷ Earnings Growth Rate
Target range: 0.8 - 1.2
Below 0.8: Potential value trap
Above 1.5: Too speculative
Key GARP Requirements
- • Earnings Growth: Minimum 15-20% annual growth over 3 years
- • PEG Ratio: 0.8 to 1.2 (ideal range)
- • Financial Health: Debt-to-equity < 0.5, ROE > 15%, FCF margin > 10%
- • Market Timing: Avoid RSI > 65, sector concentration < 20%
Enter stock metrics above to see if it meets GARP criteria.
What if you could get the upside of growth stocks without the gut-wrenching crashes? That’s the promise of Growth at a Reasonable Price - or GARP. It’s not about chasing the hottest tech stock or buying the cheapest value trap. It’s about finding companies that are growing fast, but aren’t priced like they’re going to take over the world tomorrow. And in today’s market - where inflation is sticky, rates are high, and investors are nervous - GARP isn’t just smart. It’s essential.
What Exactly Is GARP Investing?
GARP stands for Growth at a Reasonable Price. It’s a hybrid strategy that blends the best of two worlds: the growth investor’s eye for expanding businesses and the value investor’s discipline around price. You’re not looking for companies that are cheap today - you’re looking for ones that are growing fast and still reasonably priced based on that growth.
This isn’t a new idea. Peter Lynch, the legendary manager of Fidelity’s Magellan Fund from 1977 to 1990, made it popular. He didn’t just buy companies with strong earnings - he asked: "Is this growth already priced in?" If a company was growing 20% a year but trading at a P/E of 60, he walked away. If it was growing 18% and trading at a P/E of 20? That’s the sweet spot.
Today, GARP is backed by data. Between 2000 and 2003, when the dot-com bubble burst and pure growth stocks lost half their value, GARP portfolios lost only about 15% - and still captured 85% of the upside when markets recovered. That’s the power of balance.
The Four Pillars of GARP
GARP isn’t a vague philosophy. It’s a checklist. Here’s what serious GARP investors look for:
- Earnings Growth: Look for companies with at least 15-20% annual earnings growth over three years. S&P’s GARP index requires a minimum of 12% consistent growth. Anything below that isn’t growth - it’s noise.
- Valuation: The PEG Ratio: This is the heart of GARP. The PEG ratio = Price-to-Earnings ratio divided by Earnings Growth Rate. A PEG of 1 means the stock is fairly priced for its growth. GARP investors target 0.8 to 1.2. Anything above 1.5? That’s speculative. Below 0.8? Might be a value trap.
- Financial Health: Strong growth means nothing if the company is drowning in debt. Look for debt-to-equity under 0.5, return on equity above 15%, and free cash flow margins over 10%. If a company is growing sales but burning cash, it’s not sustainable.
- Market Conditions: Avoid stocks with RSI above 65 - they’re overbought. And diversify. No more than 20% in any one sector. In late-cycle markets, lean into healthcare, consumer staples, and utilities. They don’t explode - but they don’t vanish either.
These aren’t optional filters. They’re the rules. Skip one, and you’re no longer doing GARP - you’re gambling.
GARP vs. Growth vs. Value
Let’s cut through the noise. Here’s how GARP stacks up against its two main rivals:
| Strategy | Best For | Drawdown in 2022 | 5-Year Avg. Revenue Growth | PEG Ratio Target |
|---|---|---|---|---|
| GARP | Late-cycle, volatile markets | 18.2% | 14.3% | 0.8-1.2 |
| Pure Growth | Early bull markets | 66.9% | 18.1% | 1.5-2.5+ |
| Pure Value | Recovery phases | 24.5% | 7.8% | Under 1.0 |
In 2021, when ARKK (a pure growth ETF) surged 152%, GARP lagged by 22%. But in 2022, when ARKK collapsed 67%, GARP only dropped 18%. That’s not a failure - that’s a feature. GARP doesn’t win every race. It wins the marathon.
And here’s the kicker: GARP avoids value traps. In 2019-2020, value stocks looked cheap - until they kept falling. GARP investors stayed away because those companies weren’t growing. They weren’t just cheap - they were dying.
Why GARP Works Now (2025)
The economy in 2025 is slowing. GDP growth is around 2.1%. Inflation is still above target. The Fed isn’t cutting rates anytime soon. Growth stocks are no longer the only game in town. Value stocks are still cheap, but they’re not growing. That’s where GARP shines.
As of May 2023, the median PEG ratio of S&P 500 stocks dropped to 1.15 from 1.85 in 2021. That means the pool of GARP-eligible stocks nearly doubled - from 12% to 25% of large caps. More opportunities. Less overvaluation.
Institutional money is flowing in. Sixty-three of the top 100 pension funds now use GARP in at least 15% of their portfolios - up from 41 in 2020. Why? Because they’re tired of getting crushed in downturns. They want consistent returns with less pain.
Even ESG is getting folded in. Morgan Stanley’s "GARP 2.0" adds environmental and governance scores to the mix. Stocks with ESG ratings above 70 outperformed traditional GARP picks by 1.8% annually in backtests. It’s not about being "green" - it’s about better management. Companies with strong governance tend to have more predictable earnings. That’s GARP’s core.
Real-World GARP: What It Looks Like
Here’s how one investor did it. On Reddit, a user named ValueGrowth78 built a GARP portfolio in 2018. He screened for:
- 3-year EPS growth >15%
- PEG < 1.0
- Free cash flow yield >4%
He ended up with 30 stocks. Over five years, his portfolio returned 11.2% annually - just below the S&P 500’s 13.1%, but with 32% peak drawdown versus the index’s 34%. That’s close, but with far less stress. He didn’t panic in 2022. He didn’t chase AI hype in 2021. He held.
Another investor on Bogleheads tried the same screen in 2023. His universe shrank from 500 stocks to just 47. That’s not a flaw - it’s a feature. GARP isn’t about quantity. It’s about quality. If you can’t find enough candidates, you’re not missing out - you’re avoiding bad bets.
And here’s the truth most people ignore: GARP doesn’t work in early bull markets. If you’re in a Fed-driven, zero-rate rally, pure growth will crush you. But if you’re in a market where earnings matter more than hype - which is most of the time - GARP wins.
How to Start With GARP
You don’t need a PhD. You don’t need fancy software. Here’s how to begin:
- Start Simple: Use free tools like Yahoo Finance or Finviz. Screen for: 3-year EPS growth >15% and PEG < 1.2.
- Add Filters: Then add debt-to-equity < 0.5 and free cash flow margin >10%.
- Check the Sector: Don’t own 10 tech stocks. Spread it out. Healthcare, industrials, consumer goods - these are GARP staples.
- Wait for the Right Entry: Even a great GARP stock can be overbought. Use RSI < 65 to avoid buying at the top.
- Rebalance Quarterly: Growth rates change. PEG ratios shift. Recheck every three months. Sell if growth slows below 12% or PEG jumps above 1.5.
It takes 6-9 months to get comfortable. Most people give up before then. Don’t be one of them.
The Downsides - And How to Handle Them
GARP isn’t perfect. Here’s what you’ll face:
- Underperformance in bull markets: In 2017, GARP lagged growth by 9.3%. If you’re chasing fireworks, GARP feels boring.
- Fewer candidates: In 2023, only 12.3% of S&P 500 stocks met traditional GARP criteria - down from 28.6% in 2010. That’s because growth stocks got so expensive, they blew past "reasonable." But that’s the point. GARP forces you to wait.
- Requires patience: You won’t see 10x returns. You’ll see steady 10-15% annual gains. That’s fine - if you’re building wealth, not betting on lottery tickets.
Jeremy Grantham of GMO says GARP is disappearing. He’s right - but only because most investors stopped doing it right. They bought growth stocks with PEGs of 2.5 and called it GARP. That’s not GARP. That’s delusion.
True GARP is discipline. It’s saying no to the hype. It’s buying a company growing at 18% for a PEG of 1.1 - even when everyone else is chasing AI startups with no revenue.
Final Thought: Why GARP Is the Quiet Winner
The market doesn’t reward the loudest. It rewards the most consistent.
GARP doesn’t make headlines. You won’t see it on CNBC. But it’s quietly growing. $287 billion is now managed under GARP strategies. That’s not a fluke. That’s evidence.
It’s the strategy for people who want to grow their wealth without losing sleep. For those who know that markets cycle - and that the best investors don’t try to time them, but ride them with balance.
If you’re tired of roller coasters - and you want to build real, lasting wealth - GARP isn’t just a strategy. It’s the most rational choice you’ll make this year.
Is GARP investing still relevant in 2025?
Yes. With slowing economic growth, elevated inflation, and higher interest rates, markets are shifting from growth-at-all-costs to earnings-driven returns. GARP thrives in this environment because it filters out overvalued stocks while keeping exposure to companies with real, sustainable growth. As of mid-2023, the number of GARP-eligible S&P 500 stocks rose to 24.7% - up from just 12.3% in early 2023 - making it easier than ever to build a diversified GARP portfolio.
What’s the difference between PEG ratio and P/E ratio?
The P/E ratio (Price-to-Earnings) tells you how much you’re paying for each dollar of earnings. The PEG ratio (Price/Earnings to Growth) adds growth into the equation. It’s P/E divided by the company’s expected earnings growth rate. A P/E of 20 might seem high - but if the company is growing 25% a year, the PEG is 0.8, which is actually cheap. PEG adjusts for growth. P/E doesn’t.
Can I invest in GARP through ETFs?
Yes. The S&P GARP 500 Index, launched in March 2023, is the most direct way to access GARP through an ETF. Several fund managers now offer ETFs tracking this index. Look for funds labeled "GARP" or "Quality Growth" with low expense ratios under 0.30%. Avoid ETFs that just say "growth" - they’re often pure growth, not GARP.
Does GARP work for small-cap stocks?
It can, but it’s harder. Small-cap stocks are more volatile and have less reliable earnings data. Most GARP strategies focus on large-cap or mid-cap stocks because they have longer track records and more transparent financials. If you want to include small caps, tighten your filters: require 5+ years of consistent growth, free cash flow positivity, and debt-to-equity under 0.3.
What’s the biggest mistake people make with GARP?
They confuse "growth" with "hype." Many investors buy stocks with high P/E ratios because they’re growing fast - and call it GARP. But if the PEG is above 1.5, it’s not reasonable. GARP isn’t about growth alone. It’s about growth at a price that makes sense. If you’re paying for future dreams instead of current results, you’re not doing GARP - you’re speculating.
How often should I rebalance a GARP portfolio?
Quarterly. Earnings reports come out every three months, and growth rates change. A stock that had 20% growth last quarter might only have 8% this quarter. Recheck your PEG ratios, debt levels, and cash flow. Sell if the fundamentals break your criteria. Don’t hold onto a stock just because you bought it. GARP is dynamic - not static.
Graeme C
GARP is the only strategy that doesn’t make me want to throw my laptop out the window during a market crash. I used to chase meme stocks like a fool - ARKK, NVDA, all that noise. Then I stumbled on GARP in 2022 and realized I’d been gambling, not investing. My portfolio took a 15% hit while everyone else lost 40%. No one talks about this, but it’s the quietest edge in finance. I’m not rich, but I sleep well. That’s the win.
PEG under 1.2, FCF margin above 10%, debt-to-equity under 0.5 - if you skip one, you’re not doing GARP. You’re just pretending. And yeah, it’s boring in bull markets. So what? I’m not here to impress people on Twitter. I’m here to retire before 60.
Also, stop calling any growth stock with a P/E of 30 "GARP." That’s not investing - that’s delusion with a spreadsheet.