2 Stocks to Buy for Growth Without Overpaying
These undervalued stocks offer growth at a reasonable price.
Susan Dziubinski: Hi, I’m Susan Dziubinski, co-host of The Morning Filter podcast. On a recent episode, Morningstar’s Chief US Market Strategist Dave Sekera talked about GARP investing. GARP stands for growth at a reasonable price. Rather than buying the fastest-growing companies, regardless of their stock valuations, GARP investors look for businesses that are growing at a healthy clip, but whose stock prices look reasonable.
How can investors find GARP stocks to buy? Look to PEG ratios. The PEG ratio compares a company’s P/E ratio to its expected earnings-growth rate. Companies with PEG ratios below 1.0 can be good GARP candidates. Dave’s GARP stock picks were Nvidia NVDA, Broadcom AVGO, LPL Financial LPLA, T-Mobile TMUS, and CNH Industrial CNH.
Today, we’re focusing on two more good GARP stock candidates.
2 GARP Stocks to Buy
Our first GARP stock to buy is On Holding. On has been the fastest-growing sportswear company in the world since the pandemic and is best known for its running shoes. We think the company has carved out a narrow economic moat based on brand intangible assets. We project 17% sales growth in 2026, and over the next decade, we forecast a total compound average annual sales growth rate of 11%. We think the stock is worth $48.
Read Morningstar’s full report about On Holding.
Our second GARP stock to own is Chewy. Chewy is a leading e-commerce retailer of pet food, toys, supplies, and medication. The company is leveraging its leading online pet retail offering to construct a wide-ranging integrated pet care ecosystem. We think Chewy has carved out a narrow economic moat underpinned by intangible assets. We’re forecasting revenue to compound at a 6.5% annual growth rate over the next decade. We think Chewy’s stock is worth $32.
Read Morningstar’s full report about Chewy.
For more stock ideas, be sure to tune in to The Morning Filter wherever you get your podcasts and visit Morningstar.com, too.
Morningstar senior analyst David Swartz and analyst Brett Husslein provided the research behind this segment.
Watch 3 Undervalued Stocks That Aren’t Value Stocks or Growth Stocks for more from Susan Dziubinski.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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