Personal Finance »PF News»PF News Details
PF News Details

Tipping Point: What is the GARP approach to investing?

Business Standard / 12 Jul 17 | 11:59 PM

What is the GARP approach to investing?

GARP stands for growth at reasonable price. This approach is well-suited to current market conditions when a large number of stocks are trading at more than their five-year average P/Es (price-to-earnings ratio). If you adhere to a strict value approach, you would not be able to invest in any of these stocks. So, many investors rely on the PEG (P/E to growth) ratio.

Widgets Magazine

How are stocks chosen here? 

To calculate the PEG ratio, a stock’s P/E ratio is divided by its EPS (earnings per share) growth rate. If the PEG ratio is less than one, individual can invest in the stock even though the P/E ratio looks high. The EPS growth rate used can be historical. Some analysts also use estimated EPS growth rates for the future. The rationale: Many high P/E stocks are able to maintain a high earnings growth rate for a long time, thereby justifying the investor’s faith in them.

Widgets Magazine


Company Price Gain (%)
O N G C171.554.32
Coal India260.302.52
ICICI Bank282.702.02
Axis Bank510.401.06


Given the current crisis at Infosys, what would your investment strategy in the company's stock be?

Online Portfolio

You can create Online Portfolio here using the below button.

Widgets Magazine