Many growth stocks have not fared well over the past week, judging by the SPDR Portfolio S&P 500 Growth ETF’s (SPYG) recent performance. These losses can be attributed to higher interest rates and concerns over the new COVID variant. However, that’s no reason to stop investing in growth stocks. You just need to be more selective.
A growth strategy that typically performs better in volatile periods such as this is Growth at a Reasonable Price or GARP. The strategy essentially combines growth and value investing. Instead of ignoring a company’s valuation, which many investors do with high-growth stocks, we only invest in growth stocks that look cheap.
This is very easy to accomplish with our POWR Ratings system. All we need to do is run a search for stocks that have an overall grade of A or B, a Growth Grade of A or B, and a Value Grade of B. This makes sure we’re checking all the boxes. G-III Apparel Group, LTD. (GIII), Alkermes plc (ALKS), and Methanex Corporation (MEOH) are three stocks that fit the bill.
G-III Apparel Group, LTD. (GIII)
GIII is a textile company. It makes a wide range of apparel, footwear, and accessories that it sells under its own brands, licensed brands, and private-label brands. The company has a substantial portfolio of licensed and proprietary brands anchored by five global power brands: DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger, and Karl Lagerfeld.
The firm has been gaining from high demand for its assortments. Plus, its digital business is helping to drive growth. Its performance has been so strong that management even raised its fiscal 2022 view. GIII has also undertaken strategies such as acquisitions and licensing of well-known brands to expand its product portfolio. Its international business is also a crucial driver of growth for the company.
GIII has an overall grade of B, which translates into a Buy rating in our POWR Ratings system. The company has a Growth Grade of B as earnings have surged 261.4% over the past year while EBITDA has jumped 107.8% over the same time frame. Earnings are expected to jump 76.7% year over year in the current quarter and 487.3% for the year.
The company also has a Value Grade of A, which isn’t surprising, with a trailing P/E of 12.22 and a forward P/E of 9.82. We also provide Momentum, Stability, Sentiment, and Quality grades for GIII, which you can find here. GIII is ranked #10 in the A-rated Athletics & Recreation industry. For more top stocks in this industry, click here.
Alkermes plc (ALKS)
ALKS is a fully integrated global biotechnology company that applies its proprietary technologies to research, develop, and commercialize pharmaceutical products designed for unmet medical needs in major therapeutic areas. The company utilizes several collaborative arrangements to develop and commercialize products.
The firm purchases active drug products from third parties or receives them from its third-party licensees to formulate products using its technologies. Growth is being driven by Vivitrol, which treats alcohol dependence, and Aristada, which is used to treat schizophrenia. In June, the FDA approved Lybalvi to treat adults with schizophrenia and bipolar I disorder. The drug was launched in October and is expected to boost the company’s growth potential.
ALKS has an overall grade of B and a Buy rating in our POWR Ratings system. The company has a Growth Grade of A as EBITDA has grown an average of 26.4% per year over the past three years. Earnings are expected to surge 70% year over year in the current quarter and 106% per year over the next five years. ALKS also has a Value Grade of A due to an attractive valuation.
For instance, the stock has a price-to-sales ratio of 3.1, which is well below the industry average. Its price to book of 3.2 is also well below the industry average. For the rest of ALKS’s grades (Momentum, Stability, Sentiment, and Quality), click here. ALKS is ranked #20 in the Medical – Pharmaceuticals industry. For more top-ranked stocks in this industry, make sure to visit this link.
Methanex Corporation (MEOH)
MEOH manufactures and sells methanol. Its customers use methanol as a feedstock to produce end-products, including adhesives, foams, solvents, and windshield washer fluids. The company also sells its products to the oil refining industry. The methanol is blended with gasoline to produce a high-octane fuel or blended as a component of biodiesel.
In the third quarter, sales rose 85.5% year over year due to higher methanol prices and sales volumes. The average realized price for methanol was $390 per ton in the third quarter, increasing 79.7% year over year. Prices were driven higher by a tight methanol market and industry supply bottlenecks. MEOH also restarted its Geismar 3 project, which should enhance its portfolio and help with future cash flow.
The company has an overall grade of B, translating into a Buy rating in our POWR Ratings system. The company has a Growth Grade of B and a Value Grade of B. Its Growth Grade is a reflection of strong recent and expected sales growth. Revenues are expected to jump 54.2% for the year. Earnings are forecasted to soar 700% year over year in the current quarter and 388.9% for the year.
Low valuation metrics such as a price to sales ratio of 0.8 and a price to tangible book of 2.0 line up with its Value Grade of B. To access all of MEOH’s grades, including Momentum, Stability, Sentiment, and Quality, click here. MEOH is ranked #22 in the A-rated Chemicals industry. For more top stocks in the Chemicals industry, click this link.
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This article was written by David Cohne, Chief Value Strategist for StockNews.com. David has helped investors find the most profitable stocks for over 20 years.
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GIII shares were trading at $29.83 per share on Tuesday afternoon, down $1.09 (-3.53%). Year-to-date, GIII has gained 25.65%, versus a 23.45% rise in the benchmark S&P 500 index during the same period.
About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More...
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