GARP Screen — Growth at a Reasonable Price

What Is GARP Investing?

Growth at a Reasonable Price — GARP — is an investment philosophy associated most closely with Peter Lynch, who ran the Magellan Fund at Fidelity from 1977 to 1990, generating approximately 29% average annual returns over that period. Lynch rejected the binary choice between pure growth investing (buy great companies regardless of price) and pure value investing (buy cheap companies regardless of quality) in favor of a middle path: growth companies that are not priced for perfection.

Lynch popularized the PEG ratio — price-to-earnings divided by earnings growth rate — as a shorthand for identifying GARP opportunities. A PEG ratio below 1.0 indicates a company growing faster than its P/E multiple, which Lynch considered an attractive entry point. A PEG above 2.0 indicates a company where the growth premium appears excessive. The intuition is simple: if a company is growing earnings at 20% annually, a P/E of 20 is "reasonable" by Lynch's framework; a P/E of 40 is not.

GARP is not a rigorous academic framework — it is an investor heuristic, and its empirical track record is mixed outside of Lynch's specific period. The PEG ratio has known weaknesses: it treats linear P/E-to-growth relationships as valid when compounding is nonlinear; it uses forward or trailing growth rates interchangeably across different implementations; and it does not account for the sustainability of the growth rate, which is the most important variable.

That said, the GARP intuition is sound: paying a reasonable multiple for genuine growth is a more durable strategy than either overpaying for growth or buying cheap companies with no growth. The companies that produce the best long-run returns tend to compound at high rates for long periods and are not consistently available at deep value prices.

The criteria in plain English:

• EPS growth above 10% — the company is genuinely growing earnings
• P/E between 10 and 30 — not a deep value stock, but not priced for perfection
• Positive revenue growth — earnings growth should not be coming entirely from margin expansion or share buybacks
• PEG ratio implicitly below 2.0 — the multiple is reasonable relative to the growth rate

This screen will surface mid-cap and large-cap companies across a range of sectors where earnings growth is consistent and the multiple is not extreme. It is less useful for very early-stage growth companies (where P/E is undefined or very high) and for turnarounds (where the growth rate is measured off a trough base).

---

How to Run This Screen in GeminIQ

Step 1. Open the GeminIQ Screener

Step 2. Add the following filters:

Filter	Operator	Value
EPS TTM Growth 1Y	≥	10
Net Revenue TTM Growth 1Y	≥	5
P/E TTM	between	10 and 30
P/E TTM	≥	1

The revenue growth floor distinguishes genuine earnings growth from buyback-driven EPS growth at stagnant companies. The P/E between filter uses GeminIQ's between operator to set both a floor and ceiling simultaneously.

Step 3. Set Sort By to EPS TTM Growth 1Y, direction Descending — fastest earnings growth first.

Step 4. For longer-duration GARP — companies sustaining growth over multiple years — add a 3-year earnings growth filter:

Filter	Operator	Value
EPS TTM Growth 3Y	≥	8

This requires earnings growth to be sustained over three years rather than appearing only in the most recent year.

GeminIQ Tip: The PEG ratio is not a native GeminIQ screener field, but you can calculate it manually from the results: take P/E TTM ÷ EPS TTM Growth 1Y for each company. P/E of 20 with 20% growth = PEG of 1.0. P/E of 20 with 10% growth = PEG of 2.0. Lynch's target zone was PEG < 1.0; the broader GARP universe extends to PEG < 2.0.

---

What Aggregator Data Misses for This Screen

GARP screens are particularly sensitive to how earnings growth is calculated — specifically, what earnings base is used and how one-time items are treated.

EPS base effects. A company that reported a loss or very low earnings in the prior-year period will show an artificially high EPS growth rate in the current period, even if the business is not genuinely accelerating. Aggregators applying "adjusted EPS" will normalize away many of the charges that create low bases. GeminIQ's growth rates are computed from as-filed GAAP EPS, which can produce base-effect distortions in both directions. Checking the absolute EPS figure over time — not just the growth rate — catches these cases.

Share buyback-driven EPS growth. A company shrinking its share count through buybacks can show double-digit EPS growth with flat or declining net income. The Net Revenue TTM Growth 1Y and Net Income TTM Growth 1Y filters partially address this, but GeminIQ also provides Basic Shares and Diluted Shares as filterable fields, allowing you to identify companies where share count is declining as a driver of EPS growth rather than operational improvement.

Revenue recognition changes. Companies that adopted ASC 606 (the new revenue recognition standard) in 2018-2019 often showed apparent revenue growth or decline in the transition year that was a reclassification, not a genuine change in business volume. Aggregators applying normalized revenue templates may smooth this transition, showing continuity where the as-filed data shows a step change. GeminIQ's filing timeline makes the transition period visible and traceable.

---

GeminIQ builds its financial statement database from raw SEC filings, not from third-party financial data APIs.

This screen is educational and does not constitute investment advice. Past performance of any strategy does not guarantee future results.