3 Growth Stocks That Any GARP Investor Will Love
The search for GARP – growth at a reasonable price – is on. For investors looking for the best-quality growth stocks which are now trading at a reasonable price, the list is certainly longer than it was during the high-flying days of 2021. Indeed, the 2022 bear market caused the valuations of most previous high-flyers to tumble. When money isn’t free anymore, investors have to start paying close attention to how expensive stocks are relative to each other.
As a result, for this article, I’ve picked three large-cap stocks with reasonable valuations that fit into my criteria for stocks to buy right now. Any GARP investor should love these three growth stocks.
For GARP investors seeking companies with dominant market positions in the U.S. and global tech market, Alphabet (NASDAQ:GOOG) is a great pick. Google is a dominant player in the search and online advertising sectors. Over time, it appears the company’s grasp of these core markets has only tightened.
Sure, Google will continue to face competition, particularly in markets outside of North America. However, for most businesses tied in some way to the North American economy, advertising on Google has become a way of life.
Alphabet’s incredible free cash flows — built up over time as a result of an effective monopoly on itss very profitable search and advertising businesses — could be parlayed into new sectors. Alphabet’s Google Cloud business is the company’s latest unit to garner attention from investors, given its potential to generate needle-moving profits over the long term.
Trading at under 20-times trailing earnings, GOOG stock hasn’t been this cheap ever (as far as I can tell). Accordingly, given the company’s long-term growth prospects, it is among my top picks right now.
Meta Platforms (META)
Undoubtedly, Meta Platforms (NASDAQ:META) had a difficult and disappointing 2022. The company’s revenue growth stalled, leading to plummeting earnings in the nine months that ended in September.
While the company’s financials have taken a hit, due in large part to its shift toward the metaverse, its core social media business remains highly profitable, as shown by the fact that it managed to generate earnings from operations of $6.4 billion last quarter. META remains a cash flow machine. And after its CEO, Mark Zuckerberg, said that he would slow the company’s spending growth, Meta could go on a nice ride going forward
Thus, while business’ advertising spending may be rocky in 2023, META stock is worth buying at these levels. Trading at only 15-times its trailing earnings with $41 billion of cash and $52 billion of operating cash flow, this company’s $400 billion valuation is very attractive. And META definitely belongs in the GARP bucket right now.
Dutch Bros (BROS)
The success of Dutch Bros (NYSE:BROS) is impressive and undeniable, even in the face of intense competition within the retail-coffee market. BROS is obviously going to continue to grow rapidly over the next year.
However, for those considering investing in this company for the long term, it is essential to look beneath the surface. Understanding the underlying factors powering Dutch Bros’ growth can help investors make more informed decisions about whether or not to invest in it.
Dutch Bros had an impressive year of expansion in 2022, adding 233 stores. That brings its total to 671 locations around the country, despite the challenges presented by the coronavirus pandemic. This is even more remarkable when you consider that just three years ago, in 2019, it had only 370 locations.
The company has been opening 30 or more stores every quarter for the past 18 months, highlighting its continued commitment to growth and development. This steady pace of expansion ensures that Dutch Bros will be a constant presence in communities across the United States for years to come.
As Dutch Bros becomes profitable, it should display more of the growth at a reasonable price features other rivals such as Starbucks (NASDAQ:SBUX) currently have.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.