Growth at a Reasonable Price (GARP)

Buy growth only when the price is fair — classically when the PEG ratio sits near 1, so you're compounding earnings, not funding someone else's optimism.

Growth2–5 years per holdingintermediateFree

The thesis — why it works

Lynch's central insight: a growth stock isn't expensive or cheap in isolation — it's expensive or cheap relative to how fast it's growing. He popularized the PEG ratio (P/E ÷ annual earnings growth rate) as the quick test: PEG near 1 is roughly fair, well under 1 is potentially underpriced growth, above 2 you're likely paying for growth that's already priced in (or won't show up).

Growth, but not too much. Lynch's sweet spot was steady 15–25% earnings growers — "fast growers" in his taxonomy, distinct from stalwarts, cyclicals, and turnarounds. Above ~30–50%, growth rates rarely persist and the market has usually already bid the stock up in anticipation.
Invest in what you know. Lynch's edge came from ordinary consumer/industry observation — noticing a business getting better before Wall Street's models did — then verifying it with the numbers, not the other way round.
Reasonable balance sheets. Growth funded by debt is fragile growth; Lynch favored companies that could fund their own expansion.

The market's recurring mistake is bimodal: it chases "story" growth stocks to absurd multiples, and it also permanently discounts steady, boring compounders because they're unglamorous. GARP is the discipline of buying the second kind before it becomes the first kind.

When to use it

You can research individual businesses — GARP is bottom-up, not a black-box quant model.
You want growth exposure without paying nosebleed multiples for it.
You can hold through multi-year stretches while a growth story plays out.

When to avoid it

You want a fully mechanical approach with zero business judgment — use the Magic Formula or a straight PEG screen instead.
The business is cyclical (autos, commodities, capital goods) — trailing "growth" near a cycle peak makes PEG meaningless.
The company is pre-profit — PEG is undefined without a positive P/E and real earnings.

The screen (Screener.in)

Criterion	Rule	Why
Market cap	`> ₹500 Cr`	liquidity, reliable multi-year data
Profit growth (5-yr)	`15%–30%`	Lynch's "fast grower" band — real, but not already priced for perfection
PEG ratio	`0–1.5`	classic Lynch fair-value zone, some room above the strict "1"
Debt to equity	`< 1`	growth funded by the business, not leverage
Return on equity	`> 15%`	growth that's actually profitable, not just top-line noise

Copyable Screener.in query:

Market Capitalization > 500 AND
Profit growth 5Years > 15 AND
Profit growth 5Years < 30 AND
PEG Ratio > 0 AND
PEG Ratio < 1.5 AND
Debt to equity < 1 AND
Return on equity > 15

Screener's PEG Ratio uses trailing growth, not Lynch's forward estimate — treat it as a starting filter, then form your own 3–5 year growth view per stock.

The procedure

Run the query on Screener.in.
Drop anything you can't explain in one sentence — what it sells, to whom, and why that keeps growing (Lynch's "invest in what you know" filter).
For each survivor, read the last 2 years of annual reports/concalls: is growth organic (volumes, market share, new stores/products) or a one-off (acquisition, base effect, tax item)?
Check promoter holding and pledging — growth without aligned, credible ownership is a red flag.
Form your own forward growth estimate and re-check PEG against it, not just the trailing number.
Build positions gradually across 15–25 names; add to names where growth is tracking your case, trim where PEG has drifted well past 2 without new justification.

Decision & risk rules

Position size: ~4–7% per name across 15–25 stocks — enough names to survive individual growth stories breaking.
Holding period: multi-year; let compounders run as long as the growth-to-price relationship stays reasonable.
Rebalance: revisit growth and PEG every result season, not just annually.
Exit / invalidation: growth decelerates meaningfully below your underwriting case, debt rises to fund growth, or the "story" (why this keeps growing) breaks.

Common mistakes

Anchoring to trailing growth instead of judging whether it's durable.
Buying story stocks with no real earnings — PEG needs a real, positive P/E.
Missing debt-funded "growth" that's really leverage.
Applying GARP to cyclicals, where a single strong year looks like a growth stock and isn't.