4 GARP Stocks With Discounted PEG Ratios and Strong Growth to Buy Now

Per the GARP theory, the strategic mingling of growth and value-investing principles gives us a hybrid strategy, offering an ideal investment by utilizing the best features of both. What GARPers look for is whether or not the stocks are somewhat undervalued and have solid, sustainable growth potential (Investopedia).

Several stocks that have surged significantly in recent years have demonstrated the overwhelming success of this hybrid investing strategy over pure-play value and growth investments. Here, we will discuss the success of four such stocks. These are Centene CNC, Aveanna Healthcare AVAH, PENN Entertainment PENN and Sanmina Corporation SANM.

A Few More Words on GARP

GARP investing gives priority to one of the popular value metrics — the price/earnings growth (PEG) ratio. Although it is categorized under value investing, this strategy follows the principles of both growth and value investing.

The PEG ratio is defined as (Price/ Earnings)/Earnings Growth Rate

It relates the stocks’ P/E ratios to the future earnings growth rates.

While P/E alone gives an idea of stocks that are trading at a discount, PEG, while adding the growth element to it, helps identify stocks with solid future potential.

A lower PEG ratio, preferably less than 1, is always better for GARP investors.

Say, for example, if a stock's P/E ratio is 10 and the expected long-term growth rate is 15%, the company's PEG will come down to 0.66, a ratio indicating both undervaluation and future growth potential.

Unfortunately, this ratio is often neglected due to investors' limitations in calculating the future earnings growth rate of a stock.

There are some drawbacks to using the PEG ratio, though. It does not consider the very common situation of changing growth rates, such as the forecast of the first three years at a very high growth rate, followed by a sustainable but lower growth rate over the long term.

Hence, PEG-based investing can be even more rewarding if some other relevant parameters are also taken into consideration.

Here are the screening criteria for a winning strategy:

PEG Ratio less than X Industry Median

P/E Ratio (using F1) less than X Industry Median (For more accurate valuation purposes)

Zacks Rank of 1 (Strong Buy) or 2 (Buy) (Whether good market conditions or bad, stocks with a Zacks Rank #1 or #2 have a proven history of success.)

Market Capitalization greater than $1 Billion (This helps us to focus on companies that have strong liquidity.)

Average 20-Day Volume greater than 50,000: A substantial trading volume ensures that the stock is easily tradable.

Percentage Change F1 Earnings Estimate Revisions (4 Weeks) greater than 5%: Upward estimate revisions add to the optimism, suggesting further bullishness.

Value Score of less than or equal to B: Our research shows that stocks with a Value Style Score of A or B, when combined with a Zacks Rank #1, 2 or 3 (Hold), offer the best upside potential.

Growth Score of less than or equal to B: Our research shows that stocks with a Growth Style Score of A or B, when combined with a Zacks Rank #1, 2 or 3, offer the best upside potential.

Our PEG-Driven Picks

Here are four stocks that qualified the screening:

Centene: It is a diversified healthcare company providing managed-care services primarily through government-sponsored programs, while also serving underinsured and uninsured individuals with member-focused healthcare solutions. Operating a capitated payment model, the company served about 27.6 million members across all 50 states as of Dec. 31, 2025, strengthening its leadership in Medicaid through the 2020 WellCare Health acquisition.

CNC can be an impressive GARP investment pick with its Zacks Rank #1, a Value Score of A and a Growth Score of A. Apart from a discounted PEG and P/E, the stock has an impressive long-term expected growth rate of 38.2%.

Aveanna: The company is a diversified U.S. home care provider offering pediatric and adult healthcare services that enable patients to receive care at home, reducing reliance on hospitals and skilled nursing facilities. Through its Private Duty Services, Home Health & Hospice and Medical Solutions segments, the company provides skilled nursing, therapy, personal care, hospice and medical supply services.

AVAH can be an impressive GARP investment pick with its Zacks Rank #2, a Value Score of A and a Growth Score of A. Apart from a discounted PEG and P/E, the stock has an impressive long-term expected growth rate of 14.9%.

PENN: It is a leading regional gaming and racing operator with a geographically diversified portfolio of casinos, racetracks and video gaming terminal operations across the United States. Through strategic acquisitions, developments and property expansions, the company has evolved into one of the nation's largest regional gaming operators, offering gaming, hospitality, entertainment and sports betting experiences.

PENN has a Zacks Rank #1, a Value Score of A and a Growth Style Score of A. PENN Entertainment also has an impressive five-year expected growth rate of 38.1%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Sanmina: Headquartered in San Jose, CA, Sanmina is a leading provider of integrated electronics manufacturing services, offering product design, engineering, manufacturing, logistics and supply chain solutions to OEMs across industrial, medical, defense, automotive, communications, and cloud and AI infrastructure markets. The company operates through its Integrated Manufacturing Solutions and Components, Products and Services segments, with IMS contributing the majority of revenues.

SANM can also be an impressive GARP investment pick with its Zacks Rank #1, a Value Score of A and a Growth Score of A. Apart from a discounted PEG and P/E, the stock also has a solid long-term expected growth rate of 15.6%.

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This article originally published on Zacks Investment Research (zacks.com).

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