Peter Lynch, who gained fame managing Fidelity’s Magellan Fund, has had his investment approach structured into a systematic model by Validea. This model focuses on identifying companies with growth potential that aren’t overpriced—an approach called GARP (Growth At a Reasonable Price).
At the core of this strategy is the PEG ratio, which compares a company’s P/E ratio to its earnings growth rate. A PEG below 1.0 suggests the stock might be undervalued relative to its growth prospects.
The model prizes consistent earnings growth, particularly favoring businesses with steady annual growth of 20-30%. It’s cautious about extremely high growth rates, recognizing these may not be sustainable long-term.
Lynch’s framework categorizes companies into three types—slow growers, stalwarts, and fast growers—with each requiring different analytical approaches.
Financial health is another key consideration, with the strategy prioritizing companies that maintain reasonable debt levels as measured by their debt-to-equity ratios. This emphasis on manageable leverage helps identify companies that are better positioned to survive economic challenges.
Discover how Validea’s models can help you identify high-quality, long-term investments, even in changing market conditions. Visit Validea.com to access in-depth stock analysis and tools designed to emulate proven investment principles. Take a Free Trial Today!
Here are the top ten highest scoring stocks for February 2025 based on Validea’s Peter Lynch strategy.
| Ticker | Company Name | P/E/Growth Investor | Price | Market Cap ($mil) | PE Ratio | Price/ Sales | Relative Strength | Price/ Book | Price/ Cash Flow | Dividend Yield | Long-Term EPS Growth |
|---|---|---|---|---|---|---|---|---|---|---|---|
| AX | AXOS FINANCIAL INC | 100 | $65.83 | $3,759 | 8.9 | 3.1 | 77 | 1.5 | 8.1 | 0.0% | 25.9% |
| BAP | CREDICORP LTD | 100 | $181.29 | $14,401 | 9.7 | 2.4 | 63 | 1.5 | 8.4 | 0.0% | 39.9% |
| BIDU | BAIDU INC (ADR) | 100 | $89.02 | $31,215 | 9.5 | 1.7 | 39 | 0.9 | 7.3 | 0.0% | 31.0% |
| CFB | CROSSFIRST BANKSHARES INC | 100 | $15.95 | $787 | 10.2 | 3.0 | 75 | 1.0 | 12.4 | 0.0% | 31.0% |
| FBP | FIRST BANCORP | 100 | $19.19 | $3,145 | 10.6 | 3.4 | 70 | 1.9 | 12.8 | 3.3% | 35.4% |
| OFG | OFG BANCORP | 100 | $41.77 | $1,898 | 10.1 | 2.7 | 71 | 1.5 | 8.6 | 2.3% | 36.1% |
| OZK | BANK OZK | 100 | $48.02 | $5,448 | 7.8 | 3.3 | 69 | 1.0 | 9.5 | 3.3% | 16.9% |
| PLAB | PHOTRONICS INC | 100 | $20.70 | $1,316 | 9.9 | 1.5 | 34 | 1.1 | 4.9 | 0.0% | 37.2% |
| TCBX | THIRD COAST BANCSHARES INC | 100 | $35.36 | $487 | 14.1 | 2.8 | 92 | 1.1 | 14.6 | 0.0% | 29.2% |
| NWG | NATWEST GROUP PLC – ADR | 98 | $11.80 | $46,115 | 9.0 | 2.3 | 92 | 1.8 | 6.3 | 0.0% | 20.9% |
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