Growth at a Reasonable Price
An approach that seeks companies growing above average while refusing to pay a multiple that assumes the growth continues indefinitely.
How it is identified
Test: above-market earnings growth with a PEG near or below 1 and a defensible reason for the growth to persist
Unit
qualitative
In depth
GARP is a middle position between value and growth, accepting that a fast-growing business deserves a premium while insisting the premium be bounded. In practice it leans heavily on the PEG ratio, which inherits all of that ratio's weaknesses — chiefly treating growth as a permanent constant and ignoring risk and capital intensity. The discipline it enforces is useful: it forces an explicit statement of what growth rate the current price requires. Its failure mode is buying moderate quality at moderate prices and getting neither the compounding of a great business nor the margin of safety of a cheap one.
Worked example
A company growing earnings 25% a year at a P/E of 20 has a PEG of 0.8 and qualifies. The same company at a P/E of 45 has a PEG of 1.8 — the growth is unchanged, and the price now requires it to continue far longer.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Growth at a Reasonable Price” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.