I was wondering how people find growth stocks. I do the following. I have a friend who recommends them. I use the board. I subscribe to the Motley Fool, and I have a screen, which follows.
Exchange not otc
Sector not utilities or financials
Price >= 3
Avg Daily $ Volume (90d) >= 1,500,000
Market Cap ($MM) >= 300
Revenue (TTM, $MM) >= 200
Sales growth ttm >= 40
Operating Margin (TTM) >= 0
Operating Cash Flow (TTM) > 0
Free Cash Flow (TTM) > 0
Gross Margin (TTM) >= 40
Current ratio q1 >= 1.5
My screen is similar to yours but I have less qualifiers related to FCF, and I use FQ Sales growth rather than TTM. The reason is to identify companies that are starting to accelerate growth, to get in on the earlier portion of the curve. It requires more manual scrubbing through companies to make sure it’s not just an anomaly.
I also look at the EV/Sales and P/S to rank it against my existing portfolio, but that’s not actually in the screener. I tend not to pull the trigger if they are going to enter my portfolio as one of my more “expensive” holdings.
Flying,
I personally wrote a python script that goes through stocks listed on the NYSE and the nasdaq. Why I wrote my own python script is because I want to look at trends that can be quarter over quarter. For example one of my programs looks for companies that have grown 7% QoQ or more for the last 3 quarters. I also use valuation metrics to help narrow the results as well.
If your interested in running a similar code. It’s now easier than ever, with AI. Yahoo API has some basic metrics or if you have a subscription to others you can get very specific.
I personally really enjoy ryshab grading mechanics. Companies that show up on it are always worth a second look. I developed my own formulas after studying his. One of my favorite is to modeling how fast a companies bottom line is growing (revenue growth rate + operating leverage/(dilution)). This gives me an example of how fast a company is growing it’s bottom line. I compare that to its current P/E, and then it’s run rate P/E. It helps me find companies I think that are growing quickly.
If you have free time and energy, I would definitely look at writing your own ranking metrics. It forces you to identify what you think is important and why. Then you can compare how your ranking methods did at finding winners in the market. This allows you to continue to improve.
Drew
I have time and energy, but I am not a software engineer. I will take another look at Ryshabs grading techniques. They looked very good. Axon looks good to me, but it needs to come down in price. I have a subscription to stock investor pro, and it allows you to create your own metric. Creating (revenue growth rate + operating leverage/(dilution)) would take less than a minute. Thanks for your advice.
What metric(s) do you use to determine value? I am perhaps more focused on value here than many/most using ev/sales, and some indicators outside Saul’s guidelines.
There are only a few sources that provide data on metrics over multiple quarters and allow downloading into excel which both are a major part of my assessment process. Stock Rover is one of the most robust.
I can think of 2. I read the earnings call and look for future guidance. If I can’t get that, I use the analysts estimates, and use free cash flow going out, as far as estimates are available. I look at dilution, and at what a future price to free cash flow will be and get an estimate of what the stock is worth. You could also combine p/b, p/s, p/e, p/cash flow, ebitda/ev, and buy back yield and create a composite score. For example, a low p/e could have a score of 100, and a high p/e a score of 1. Do the same for the other measures, and then add them up, to get a composite score.
One key concept from the way that I think about screeners is that the results coming back from the screen only change after companies report earnings. It means there is one month where resulting companies change quickly on any screen, and two months where the screening results coming back are more stable.
What I find effective is to screen more heavily after companies I own have reported. Going into earnings season it makes sense to focus primarily on what you do own. Once my companies have reported, I will use screeners more often. I prefer to cast a wide net to view a lot of different companies. Sorting the companies by different ways can be helpful as I like to check industry categories of software, semiconductors, and fintech first.
After some time of using the same screen over the course of two months, the screener results get a bit stale as they are not changing too often. Already by that time in the earnings calendar, it makes sense to prep again for the earnings on companies we do own.
I tend to use a lot of screeners. They all have different purposes but also have a lot of overlap.
Lately, I have been only working with four sectors - information technology, financials, communications and healthcare. Also, I mostly look for U.S. and Canadian stocks.
Here are the 6 screeners I currently use and their purpose:
Potential Growth Stocks v1
This shows any stock that is high growth and where analysts are behind the curve.
S curve stocks
This has a lot of overlap with the first screener. Again, mainly trying to see high growth and big analyst revisions up
Rule of 60+
High growth, High margin, profitable, big analyst revisions up
Turnarounds
Poor ltm growth, big revisions up, high ntm growth, immediate quarter revisions up - showing momentum
Elite Stocks
Very high barrier of entry across all metrics - high ltm and ntm growth, high margins, good profitability, analysts significantly behind the curve
Improving Quality
This is my latest screener. Here I am trying to capture anything that is high growth and then putting margins and fcf next to each other by ltm and last quarter. I then eyeball each entry to see if current quarter metrics are significantly better than ltm. High chance this growth stock is improving underlying metrics fast. Then I look at the charts to see if this is seasonality blip or there is something more meaty to this. This is good at picking up stocks under 100 mil. market cap and showing underlying metrics improvement.
Another very simple, but good place is Gaucho Rico’s blog and x account. He was one of the best of the old posters. Here are links. https://gauchorico.com/ https://x.com/GauchoRico
A somewhat different approach to integrate Saul’s concepts in building a successful portfolio.
I maintain a database of approximately 150 tickers which have met my minimum entry revenue growth metrics anytime in the past 12 months. The database includes growth (5 qtrs and 3 yrs of annual revenue growth), value and profitability metrics, The database is upgraded in its entirety monthly (more often during earnings season). The ticker list is auto-sort into three categories by metric targets achieved - tickers I own, a short list of tickers whose metrics currently are close to minimum entry parameters and finally tickers whose metrics are such I only want to keep them in the running for future examination. My portfolio frequently holds a old friend who has shown new life after months in the background.
Key metrics are auto-weighted and summed for each ticker. Metric Targets Achieved Ratings do not trigger entry without guidance support, however, failure to meet targets or trends more often may trigger trimming or exit. For my personal skills and over 8 decades, the data base is key for authoring the examination driving all of my entry and exit decisions.
While my process integrates most of Saul’s concepts, the use of a database has been judged to be off limits here.
Respectfully submitted, Gray
@Graydrake Point of clarification, the use of a database is not off limits so far as I know, and I’ve been following Saul for a long time. You can use whatever tools help you make investment decisions.
But keep in mind, we are far more interested in methodology and explanations then the data. What is off limits is publishing spreadsheets are large tables of data, especially if explanations aren’t provided. I think (my opinion) it’s OK to publish snippets as examples to illustrate something related to your methodology.
If I’m wrong about that I expect a board monitor to clarify and correct my comments.
Personally, as someone who has not used screens, I find this thread fascinating. Even though I don’t understand everything, for example what does “FY1E” mean?
I run into that all the time, and not just here. Someone told me, they have an mbti. How am I supposed to know what that is. It is a mild traumatic brain injury. In the new world, which I don’t like, you can put any acronym into AI, and they will tell you what it stands for.
According to ChatGPT…
When you see FY1E in stock-market contexts, it stands for Fiscal Year +1 Estimate—i.e., analysts’ earnings or revenue forecast for the next fiscal year.
Jonathan
Thank you @Jonathan1. I appreciate that you took the trouble to look it up. Something I should have done for myself, but I often forget that we have these new, powerful tools at our disposal.
Ryshab, do you use Koyfin? The excerpts you have posted look like Koyfin, buy I’m not able to find the equivalent parameters for Revenue Estimates Average % …
The problem with Koyfin is they do not allow bulk downloads. Most of my analysis of metrics occurs in my Excel database so Koyfin does not work. The next issue is the existence of metrics from multiple quarterly reports. While Koyfn has the info, extracting it is a problem. I am currently in the process of switching from Seeking Alpha to Stock Rover, which has perhaps the most comprehensive data base of company metrics and the option allowing bulk transfer.
Gray
Hi @twillo these are from Koyfin.
These are all under analysts estimates section:
There is a lot more data that you can combine and play with to get trend information.
I’ve just taken out a 7 day trial of Koyfin - but it looks like you cannot screen for stocks on a Revenue YoY % from a historical point of view - ie I cannot see how to look for stocks that are currently growing at 40%+ YoY - yet I would have thought this was the most valuable thing we would need to look for.
Chat GPT tells me that Koyfin doesn’t filter for Rev YoY%. If there are any users of Koyfin out there who know how to do this, then please point me in the right direction.
Thanks
Jonathan
Hi @jonathan1, if I understand you correctly, you are trying to screen any businesses that has a particular growth rate in the last 12 months. If this assumption is correct, Koyfin has this under popular searches section in screener. Here is a screenshot:
