(By James Brumley) A couple of weeks ago I talked about
finding bargains among blue-chip stocks, pointing out how all of the stocks I mentioned had reached bargain-basement levels in terms of their price-to-earnings (P/E) ratios. And while I'm sticking to my guns and affirming that -- for those three stocks -- a low valuation is just too attractive to pass up, it's not like a stock has to be dirt cheap to be attractive.
Growth matters too.
To that end, here are four GAARP (growth at a reasonable price) picks that look equally ripe, even if for different reasons.
1. Gildan Activewear Inc. (NYSE: GIL)
Gildan, a manufacturer of workout and athletic clothing, is the beneficiary of a subtle mega-trend -- the explosive growth in the health and fitness wear arena, which has made Lululemon Athletica (Nasdaq: LULU) a household name (not to mention a star-performer on Wall Street).
Montreal-based Gildan tripled sales during the past three years. How? Simply put, as a society we're finally getting back into better shape, and we need workout clothes to do it in.
The company hasn't developed the same brand-recognition as Lululemon, but there's still a reason earnings are expected to grow at an annualized 23% a year for the next five years. That makes the frothy P/E of about 25 much easier to swallow. And considering the company has topped estimates in eight of the past 12 quarters, future growth may be even stronger than anticipated.
2. Dollar Thrifty Automotive Group (NYSE: DTG)
At a trailing P/E of about 16, car rental company Dollar Thrifty Automotive looks as if it's at the cheaper end of the growth stock valuation scale, and perhaps even the upper end of the value scale. With last year's 35% income growth rate, however, and the 38% growth rate expected during the coming five years (the company just posted record first-quarter earnings of $1.35 per share), the P/E ratio becomes much less important -- even if it was much higher.