Growth at a Reasonable Price (GARP) isn’t just a Wall Street buzzword—it’s a time-tested investment strategy that’s winning new fans among Australian investors in 2025. In a year defined by unpredictable market swings, inflationary pressures, and the lingering effects of global economic shifts, GARP is emerging as a balanced approach for those seeking robust returns without taking wild risks.
What is GARP and Why is it Trending in 2025?
GARP—Growth at a Reasonable Price—blends two of the most popular investing philosophies: growth and value. GARP investors hunt for companies that are growing faster than the market average, but whose shares are not priced at eye-watering valuations. It’s about finding businesses with solid earnings momentum and future prospects, but without paying a premium that assumes everything will go perfectly.
- Growth stocks typically have high earnings growth, but often come with expensive price tags.
- Value stocks trade at low valuations, but may lack strong catalysts for future gains.
- GARP stocks aim to deliver the best of both worlds: steady growth, at a fair or even discounted price.
In 2025, as the ASX navigates a landscape shaped by central bank rate decisions, changing government incentives, and ongoing cost-of-living debates, investors are increasingly wary of overpaying for future promise. GARP’s focus on sensible pricing offers a cushion against market volatility—and that’s never been more valuable.
How GARP Works: Key Metrics and Practical Filters
Successful GARP investing relies on a toolkit of tried-and-true financial metrics. The most famous is the PEG ratio—Price/Earnings to Growth—which helps investors judge whether a stock’s price is justified by its growth outlook.
- PEG Ratio = Price/Earnings Ratio ÷ Annual EPS Growth Rate
A PEG of 1 or lower is often the sweet spot for GARP investors: it means the company’s growth is ‘reasonably priced’. For instance, if an ASX-listed company trades at a P/E of 15 and is forecast to grow earnings by 15% per year, its PEG is 1.
Other useful GARP filters include:
- Consistent revenue and earnings growth (ideally, double-digit rates)
- Strong return on equity (ROE)—a sign of efficient management
- Reasonable debt levels—especially important given 2025’s higher interest rates
- Positive free cash flow—showing the company can fund growth internally
In practice, a GARP investor might screen the ASX 200 for companies growing earnings at 10–20% per year, but trading at P/E multiples below sector averages. Recent examples in Australia include select healthcare and technology firms that have delivered strong growth without the wild valuations seen during the pandemic boom.
Australian GARP in Action: Sectors, Stocks, and Policy Shifts
The GARP approach isn’t just for global tech giants—it’s alive and well on the ASX. In 2025, several trends are shaping the local GARP landscape:
- Healthcare and MedTech: Companies like CSL and ResMed continue to post robust growth, but after a correction in 2024, their valuations have become more palatable for GARP-focused portfolios.
- Green energy and renewables: With the Albanese government’s expanded support for clean tech and infrastructure, select energy companies are growing fast, yet aren’t trading at the speculative multiples of their US counterparts.
- Consumer staples: Firms like Woolworths and Coles are benefiting from stable demand and supply chain improvements, and their moderate P/E ratios appeal to GARP investors wary of recession risks.
Policy also plays a role. The 2025 federal budget’s focus on productivity and incentives for high-value manufacturing is expected to benefit companies with real earnings momentum—fertile ground for GARP stock pickers. Meanwhile, higher borrowing costs have put pressure on over-leveraged growth darlings, making financial health a bigger part of the GARP equation.
Risks and Realities: What GARP Investors Need to Watch
Like any investing style, GARP isn’t a silver bullet. Companies can stumble, growth can slow, and ‘reasonable’ prices can turn out to be not so reasonable in hindsight. Key risks in 2025 include:
- Interest rate shocks: Further RBA hikes could hit growth stocks hard, even those trading at fair valuations.
- Sector rotation: Sudden shifts from growth to defensive stocks can drag on GARP portfolios.
- Global supply chain risks: Disruptions could eat into margins and growth forecasts.
Smart GARP investors diversify across industries, keep a close eye on company fundamentals, and are willing to exit positions if the numbers no longer stack up. It’s not about chasing the hottest trend—it’s about finding sustainable growth stories at prices that leave room for error.
