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Is this share GASP worthy?

There are many different acronyms in the investment world. Some are silly and some are quite useful.

One of the better indicators for good investment returns is GARP shares, or Growth At a Reasonable Price. This is usually a combination of value and growth investing where shares are trading at a lower value but are growing at a good rate.

Quite often these GARP shares will have very attractive PEG ratios – where the profit growth figure (eg ‘20’%) is lower than the price/earnings ratio which could be, for example, 15.

However, a new term could also be about to enter the investing world: GASP. It stands for Growth At a Stupid Price. Katana Asset Management portfolio manager Romano Sala Tenna shared a piece for Livewire saying that some shares such as WiseTech Global Ltd (ASX: WTC) are too expensive.

Assuming WiseTech achieves huge 55% earnings per share (EPS) growth in FY19, according to Bloomberg consensus estimates, he said it would still have a P/E ratio of 95.5x. If it achieves profit growth of 36% and then 24% in the subsequent years it will still be trading with a p/e ratio of 57.

WiseTech is no doubt a great business, but Mr Tenna thinks that FOMO is driving valuations to excessively high levels even if the logistics business has a promising future.

Foolish takeaway

I can fully understand the long-term investor who bought these tech shares at a much lower price who doesn’t want to sell and is simply holding for the next five to ten years. However, investing at today’s price seems to be buying into the momentum rather than an actual logical valuation according to Mr Tenna.

Even Altium Limited’s (ASX: ALU) high valuation looks far more acceptable than WiseTech’s at the moment in my opinion.

I reckon this top ASX growth share is much more likely to deliver market-beating returns over the next few years.

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Motley Fool contributor Tristan Harrison owns shares of Altium. The Motley Fool Australia owns shares of Altium and WiseTech Global. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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