Stock Analysis using Value, Growth, Income and GARP

Beginners Guide to How to Analise Stocks to Buy or Sell at Reasonable Price using Value, Growth, Income and GARP

Understand Stock Analysis using Value, Growth, Income and GARP – Beginners Guide to How to Analise Stocks to Buy or Sell at Reasonable Price.

Stock Analysis using Value, Growth, Income and GARP

When doing stock analysis to buy shares, investors should also focus on Growth At A Reasonable Price (GARP), Growth, Value and Income of a company. Let us understand step by step:

1. Analysis of Value Stocks

There could be stock that may have been underestimated or overlooked by other investors. These stocks can have value. Maybe prices of these stocks have gone down because of some bad news or event or maybe the stock falls in a sector that is underestimated by most investors. Take a Look at: How to Buy Stocks at Bargain Price

You must remember that the company possesses fixed assets like land and buildings, inventories, subsidiaries etc. These assets have value. Value investors will understand the potential of the stock and invest or hold its shares until the rest of the market realizes the actual value of the assets of the company. Companies like Templeton Mutual funds often practice this Investment Strategy.

Learn:

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2. Analysis of Growth Stocks

Here the strategy is to buy stocks that have great growth and earning potential. Investors must target companies that are growing faster than its competitors. Such companies pay little to no dividend and reinvest their profit to grow their business. These are long-term investment because companies need time to grow. Short-term investors can avoid these stocks.

3. Analysis of High Income Stocks

Investors buy stocks for two reasons:

1. To sell at higher rates; and
2. To get income via dividends.

Investors interested in regular income through dividend can pay for high dividends.

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4. Stock Analysis with GARP (Growth at a Reasonable Price)

Growth at a Reasonable Price (GARP) combines the features of both growth investing and value investing. GARP investors look for companies that are showing at consistently at reasonable rate. GARP is considered to be the best investment strategy.

Formula of GARP:

• GARP = Price / Earnings Growth Ratio (PEG)

Where:

• Price = Current Stock Price
• PEG = P/E Ratio / Projected Growth in Earnings

Example:

Current Market Price of XYZ Company is Rs. 500 Per Share; Its’ Earnings Per Share (EPS) is Estimated to be +15% for the year; Its’ PE Ratio is 10

Now, PEG = PE / EPS = 10 / 15 = .66

Here, the PEG is less than one. This makes XYZ a good candidate for GARP.

Conclusion

I hope now you know How to do Stock Analysis using Value, Growth, Income and GARP. Please SHARE this with others. Thanks!

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