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Sometimes value and growth as investing styles are seen as polar opposites.
However, they can be combined – with the growth at a reasonable price (GARP for short) approach attempting to encompass both these factors.
The focus here is on high earnings growth where the price is low relative to forecast earnings – something which can be measured using the price/earnings to growth ratio, or PEG for short.
Where did GARP and the PEG come from?
GARP and the accompanying PEG metric were popularised by the late investor and business writer Jim Slater in the early 1990s and detailed in his 1992 book The Zulu Principle. His son Mark Slater has his own investment firm Slater Investments which has several funds where some of these principles are applied. The largest of which by assets is Slater Growth.
Most investors will be familiar with the simple price to earnings ratio but, just to recap, this number is derived by dividing the current share price by the earnings attributable to each individual share, typically known as earnings per share (EPS).
PE = share price ÷ EPS
Because markets are inherently forward looking it is more useful to use a forecast EPS for the year ahead rather than rely on a number which has already been announced. This is known as the forecast or prospective PE (a ratio based on historic EPS is known as a trailing PE).
Putting it into practice
To put this into practice, let’s look at software business Sage (using data from ShareScope). For the year to 30 September 2026, it is forecast to generate earnings per share of 50p, meaning at the share price at the time of writing of 855p it trades on a forward PE ratio of 17.1 times.
This price/earnings to growth or PEG ratio goes a step further than the PE and introduces earnings growth into the equation. It is calculated as:
PEG = PE ratio ÷ annual EPS growth
Using the Sage example again we divide the PE of 17.1 by forecast EPS growth of 17.6% to arrive at a PEG of 0.97. As a rule of thumb, a PEG of one or less is considered attractive.
Utilising ShareScope’s screening tools we have identified FTSE 350 companies which are trading at a PEG of 0.7 or less to try and identify some potential GARP candidates. We have calculated the PEG using the forecast PE and EPS growth for the next financial year each company is due to report on. One reason a stock might trade at a discounted valuation in PE terms is heavy levels of debt. Something which is not factored into the PE ratio. To account for this, we have excluded any names with a net debt to earnings ratio of more than three times.
This has automatically excluded banks and some other financial stocks from our search because this metric isn’t readily available for this type of business.
The list of low PEG stocks
The table shows the 32 companies which qualify. An initial glance reveals healthy representation for resources firms on the list.
Earnings for oil and gas companies are expected to grow substantially with energy prices surging to multi-year highs thanks to the conflict between the US and Iran. However, commodities markets are inherently volatile which means earnings in turn can experience wild upswings and downswings and forecasts are more fluid than they are for other parts of the market.
Other names on the list are on the other side of the market reaction to events in the Middle East. GKN Aerospace owner Melrose Industries has seen its shares sold off thanks to the disruption to its aviation sector clients. While rail and airport food concessions operator SSP Group has also seen its shares pressured by the upheaval in the global travel sector.
Property services firm Savills has been hit by poor sentiment towards real estate resulting from shifting inflation and interest rate expectations.
It is notable to see several consumer-facing names in the list despite a tricky backdrop. Even if Marks & Spencer’s PEG is flattered by a rebound in earnings from the previous year’s low point which resulted from a well-publicised and damaging cyber-attack.
Electronics retailer Currys does not have a similar dynamic at play and has also been a strong share price performer in 2026. It is benefiting from being one of the last physical retailers in its market with any scale. This allows it to help people navigate an increasingly complex world of consumer technology through the lifecycle of a product – from credit services to repairs and recycling. While it offers credit services to customers, Currys is not exposed to risks around rising levels of bad debt because a third party underwrites these.
A third firm in this category is footwear brand Dr Martens. The company has had more than one misstep since joining the stock market in 2021. However, in May 2026 it announced a 61% surge in pre-tax profit to demonstrate the merits of a recovery plan spearheaded by CEO Ije Nwokorie.
Tom Sieber: Content Editor
Tom Sieber is AJ Bell's Content Editor. He was previously the Editor of Shares Magazine. He has been with the business since 2012.
Tom is a regular contributor to the AJ Bell Money & Markets...
