What's the Deal with GARP?
Written by: The Smartin Team
Written by: Jerry from the Smartin team
What is the deal with people overpaying for things?
Have you ever been to an airport and bought a bottle of water? It’s six dollars! Six dollars for water! You can literally open your mouth outside when it rains and get it for free! But people buy it because they’re trapped, they’re thirsty, and they’re desperate.
That is exactly how people invest in the stock market! They see a tech company that just invented a slightly faster way to order a sandwich, and suddenly they are paying 800 times the company’s earnings! What are you doing?! Do you really think this sandwich app is going to take over the galactic economy?
You are the guy buying the six-dollar water!
This is where GARP comes in. Growth At A Reasonable Price.
It’s a very simple concept. Everyone wants growth. If a company isn’t growing, it’s dying. We all want to find the next big thing. But the “Reasonable Price” part? That’s where everybody loses their minds! They throw the price out the window! “Oh, they have AI? Here, take my house, take my car, take my firstborn child!”
GARP is the designated driver of the stock market.
It looks at that shiny, hyper-growth company, and instead of throwing money at it, GARP says, “Okay, you’re growing at 30% a year. That’s great. But your Price-to-Earnings ratio is 150. I am not paying for 150 years of your future success today. Call me when the stock drops.”
It uses a mathematical equation called the PEG Ratio. Price-to-Earnings divided by Growth. If the PEG is under 1.0, you are getting a bargain. If the PEG is over 2.0, you are buying the airport water. It is that simple!
At Smartin, our algorithm doesn’t care about the hype. It doesn’t care if the CEO was just on a podcast talking about going to Mars. It just looks at the numbers. It asks one question: Is this Growth At A Reasonable Price?
If it’s not, we roast it. We roast it until it’s crispy.
So stop paying six dollars for water. Stick to the PEG ratio, find the reasonable price, and try not to get hustled by the hype.
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