Lynch GARP

# Lynch GARP — scoring rules

Style: Peter Lynch's growth at a reasonable price, from *One Up on Wall Street* (1989) and *Beating the Street* (1993): a P/E that is low relative to the growth rate (PEG at or below 1), a growth rate that is fast but sustainable, a clean balance sheet and steady earnings. A mechanical reading of the book, not Lynch's process.

Score 0–100 = sum of points below. Inputs are SEC XBRL annual facts with split-adjusted EPS; missing inputs make a test `insufficient`, never zero. Financials are not scored.

| # | Test | Points | Scoring | Inputs |
|---|---|---|---|---|
| 1 | PEG = P/E on latest annual diluted EPS divided by the 5-year EPS compound growth rate in percentage points | 30 | linear: PEG 1.0 -> 30, 2.0 -> 0; EPS not positive in both years, or growth not positive -> 0 | EarningsPerShareDiluted (split-adjusted), price in SEC share units |
| 2 | 5-year EPS compound growth rate | 20 | full points at 12–35% a year; rising linearly from 0% to 12%; falling linearly from 35% to 60%; 0 beyond | EarningsPerShareDiluted |
| 3 | P/E on latest annual EPS | 10 | linear: 25 -> 10, 40 -> 0; EPS not positive -> 0 | as test 1 |
| 4 | Borrowings / equity | 15 | linear: 0.5 -> 15, 1.5 -> 0; equity not positive -> 0 | borrowings as in Magic Formula; StockholdersEquity |
| 5 | Years of the last 5 in which EPS rose on the prior year | 15 | 3 points per year | EarningsPerShareDiluted, six consecutive years |
| 6 | Net cash (cash minus borrowings) / market cap | 10 | linear: -25% -> 0, +10% -> 10 | CashAndCashEquivalents, borrowings, market cap |

Limits: no forward estimates, so PEG is trailing. Lynch's category judgement (slow grower, cyclical, turnaround) is not modelled. A company with EPS not positive five years ago gets no PEG.