CHICAGO, March 4, 2011 /PRNewswire/ -- Today, Zacks
Investment Ideas feature highlights Features: Monro Muffler
Brake (Nasdaq: MNRO), Carbo Ceramics (NYSE: CRR),
Vitamin Shoppe (NYSE: VSI), Radware (Nasdaq: RDWR)
and Brigham Exploration (Nasdaq: BEXP).
(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)
5 Growth Stocks Trading at a Bargain
Investing in growth stocks is a tried and true investment style,
but combining that with certain value principles can take it to the
next level. Essentially, the GARP philosophy is the practice of
finding stocks with above average growth rates and below average
valuations.
Stocks with high growth rates can justify a higher than normal
P/E ratio, but by dividing the P/E by the expected growth rate (PEG
ratio), we want to make sure that it is within reason. While there
are no strict criteria to abide by, the rule of thumb is to find a
PEG ratio of 1.0 or less.
Stocks that Make the Grade
Here are a few examples of stocks that have above average growth
rates, trade at a discount and have a Zacks #2 Rank (Buy) or
better.
Monro Muffler Brake (Nasdaq: MNRO) operates a chain of
automotive repair and tire services in the U.S. under several
different brands across its 783 stores.
MNRO is currently a Zacks #2 Rank (Buy) that trades with a
forward P/E around 22 times. That figure wouldn't make it past just
about anyone screening for a good price to earnings multiple.
However, its expected earnings growth for the next 3-5 years is
just over 25%, bringing the PEG ratio to roughly 0.9. A prime
example of a growth stock that justifies a higher P/E, but is still
considered a value.
Carbo Ceramics (NYSE: CRR) supplies ceramic proppant,
which is used in the fracturing process for oil and gas wells. They
also offer other related services.
The company's expected long-term growth rate of 35% would be
fantastic, and with a PEG ratio of 0.8 times it is coming at a very
attractive price here. Estimates have been consistently rising over
the past 3 months, which helps propel it to a Zacks #1 Rank (Strong
Buy).
Vitamin Shoppe (NYSE: VSI) is a retailer and direct
marketer of vitamins, supplements and other specialty health
products.
This Zacks #2 Rank (Buy) is expected to grow its earnings by 25%
over the foreseeable future. That should help swallow the pill of
buying a stock with a P/E ratio just above 23 times.
Radware (Nasdaq: RDWR) offers application delivery and
network solutions to banks, insurance companies, government
agencies and other customers.
Specialized tech companies are usually the bane of a value
investor's existence. So there it would be tough to sell them a
stock trading with a forward P/E north of 34 times. But let someone
know that it comes along with an expected growth rate of 35%, a PEG
of 1.0, and it starts to look like a reasonable price for a Zacks
#2 Rank.
Brigham Exploration (Nasdaq: BEXP) is an independent
exploration, development and production company that seeks onshore
domestic oil and natural gas reserves.
After reporting record production volumes, revenue and operating
income, estimates started moving higher. Now the company is
expected to grow about 40% a year for the next few years. That is
enough to justify a forward P/E of 32 times, because the PEG ratio
is at 0.8.
Best of Both Worlds
There are plenty of people from both the value and growth camp
that will vehemently argue their points on which is better. I say;
why not capitalize on the best of both worlds?
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