3 Mid-Cap Growth at a Reasonable Price Companies - Sep 2024
These growth companies are cheap to buy
Peter Lynch popularized GARP as an investment strategy and had great success with it while running the Fidelity Magellan fund. I say there is nothing wrong with growth, as long as we do not overpay for it. Ultimately it is still a value stock.
The following 3 stocks were uncovered while running a screen for mid-cap stocks. In the AIC universe, mid-cap is defined as a company with market cap between $2 B and $5 B.
The screener was run on Sep 25, 2024. In addition to screening for the market cap, it looks for EPS growth of 15% or more in the past 5 years and also expected next year. Additionally, there are filters for Sales Growth, Earnings Yield, Operating Income Growth and PEG ratios.
Let’s look at each of these names briefly.
SM Energy: SM 0.00%↑ , SM Energy is an independent energy company based in the US that is involved in acquisition, exploration, development and production of crude oil, natural gas and derivatives. It primarily obtains drilling interests through oil and gas leases from third parties.
Oil demand is expected to grow in the next year and SM Energy is projected to grow its EPS by 22.8%. It is currently trading at the P/E multiple of 5.9 which compares well with the industry average of 11.8. The business is currently highly profitable with 33% net margin and 16.6% ROIC. Debt to Equity is a reasonable 0.4. The company pays a dividend yield of 1.8%.
Overall, the first pass of the company fundamentals seems very attractive and this company is definitely worth further review.
Victory Capital Holdings: VCTR 0.00%↑ , Victory Capital Holdings is an independent investment management firm. In addition to retail and institutional asset management and advising business, it also has a line of mutual funds and ETFs. (As an aside, while researching the company I came across ULVM, VictoryShares US Value Momentum ETF, which seems very interesting to me as a multi-factor ETF, that also pays monthly distributions).
The trailing P/E multiple is around 15 which is quite reasonable. The Forward PEG is 0.6 and that is mainly because of high expected EPS growth rate of 16.6% next year. The profitability is high and it pays a 3% dividend. It could be an attractive investment and you should check it out if this looks attractive to you. I will take a pass so I can focus on other higher potential names.
The Bancorp: TBBK 0.00%↑ , The Bancorp provides commercial lending and institutional banking services. It also provides systems and technology to non-banking clients such as startups. It is one of the largest issuers of prepaid cards and other fintech solutions. The P/E of 13.4 seems to be slightly below the industry comparables. The other fundamentals seem strong as well with a Return on Equity well over 26% and 5 year average EPS growth of 18%. The stock has performed well in the past, delivering a 400% return in the past 5 years, and it is still reasonably priced.
Is this stock worth a further review? It is your call.
From this list I am moving forward with deeper dive into SM Energy and will post my analysis in the Paid Member area.
I like SM energy as well and I'm watching for a good entry. I wish SM had weekly options. Energy stocks offer the best value right now and should outperform over the next few years. But who knows in the next several months.