Investors are blending value metrics like reasonable PEG ratios with growth opportunities, focusing on sectors such as technology and industrials where earnings momentum is resilient despite macro uncertainty. GARP Investing: A Guide for Investors | Morgan Stanley Another key measure of corporate fundamentals that separates GARP stocks from the broader market is return on equity (ROE). ROE measures the net income reported by a company relative to its shareholder equity to provide a view of profitability, where a higher ROE represents greater profitability. While only one measure, a high ROE can indicate that a company allocates capital effectively and is likely to generate excess returns that can create shareholder value through reinvestment, stock buybacks, and dividends. GARP stocks have typically offered a significantly higher ROE and typically lower earnings variability than the equity market (Fig. 3). Considering these factors, we think GARP stocks are an opportunity to buy shares of more profitable and better managed companies at a material discount. Financial sector plays within a GARP framework are looking attractive as US banks approach their Q2 earnings season. Several regional banks trade at P/E ratios below 10, but still guide for mid-single-digit loan growth in 2024, giving a balance between valuation comfort and growth.