Peter Lynch's GARP strategy — popularized in his book One Up on Wall Street — finds companies growing earnings fast enough to justify their valuation. The key insight: a P/E ratio equal to the earnings growth rate is fairly valued. PEG ratio below 1 means you're getting growth on sale.
Run GARP Screen → Also try: Buffett ScorecardAll four criteria must be met for a score of 4/4 — a "Strong GARP Candidate." The dashboard scores each S&P 500 stock automatically.
Trailing Price-to-Earnings below 25. You're not overpaying for past earnings. At P/E 25, any earnings disappointment is harshly punished by the market. GARP avoids speculative valuations.
Total Debt ÷ Total Equity below 35%. A growing company funded by debt is fragile — rising interest rates can turn growth into losses quickly. GARP requires financial stability alongside growth.
Year-over-year EPS growth exceeding 15%. This is the "growth" in GARP. The company must be genuinely expanding earnings fast enough to justify any valuation premium over the market average.
PEG = P/E ÷ EPS Growth Rate. Lynch's key insight: PEG of 1.0 = fairly valued growth. PEG below 1.2 gives a small buffer. A company with P/E 20 and 25% EPS growth has a PEG of 0.8 — potentially undervalued growth.
The PEG (Price/Earnings to Growth) ratio was popularized by Peter Lynch in the 1980s and remains one of the most widely used valuation tools for growth investors.
Formula: PEG = (P/E Ratio) ÷ (EPS Growth Rate %)
Example: A stock with a P/E of 30 and EPS growth of 30% has a PEG of 1.0 — fairly valued by Lynch's standard. The same P/E of 30 with only 10% EPS growth gives a PEG of 3.0 — expensive growth.
Our screener calculates PEG using trailing P/E and year-over-year EPS growth. PEG is only valid and displayed when EPS growth is positive — a negative PEG would be meaningless.
Buy cheap regardless of growth. Low P/B, low P/E. Risk: value traps — cheap for a reason. Benjamin Graham's original framework.
Buy reasonably priced growth. Combines the discipline of value (don't overpay) with the upside of growth (earnings momentum). Peter Lynch's approach.
Buy high-growth regardless of price. High P/E, high P/S acceptable. Risk: any growth slowdown causes massive valuation compression.
A GARP score of 4/4 means all criteria are met — but this is a starting point, not a buy signal. Follow up with:
1. Buffett Scorecard — verify the business quality behind the growth (margins, moat, balance sheet).
2. FCF Yield — confirm the company generates real cash, not just accounting earnings.
3. Profitability Trend — check that EPS growth is backed by genuine margin expansion, not financial engineering.
Run GARP Screen on all S&P 500 stocks →