How To Find The Best Growth Stocks Using Finviz Tools

Finding the next big winner in the stock market can feel like searching for a needle in a haystack. But what if you had a powerful magnet to help you narrow down the field? That's essentially what Finviz offers – a comprehensive, free (with a paid premium option) stock screener that can help you identify potential growth stocks based on your specific criteria.

This guide will walk you through how to leverage Finviz's tools to find promising growth stocks, saving you time and effort in your investment research. We'll cover the essential filters and strategies to help you pinpoint companies with the potential for significant growth.

1. Understanding the Basics of Growth Stock Investing

Before diving into Finviz, let's define what we're looking for. Growth stocks are companies expected to grow their revenue and earnings at a significantly faster rate than the average company in their industry or the overall market. These companies often reinvest their profits back into the business to fuel further expansion, rather than paying out dividends.

Key characteristics of growth stocks include:

  • High revenue growth: Consistently increasing sales year after year.
  • Earnings growth: Expanding profitability, ideally at an accelerating rate.
  • Innovation: Often disruptors in their respective industries.
  • High P/E ratio (potentially): Investors are willing to pay a premium for future growth.
  • Strong management: Capable of executing the company's growth strategy.

Keep these characteristics in mind as we explore Finviz's filtering capabilities.

2. Navigating the Finviz Screener

Finviz's stock screener is located at https://finviz.com/screener.ashx. The interface might seem overwhelming at first, but it's actually quite intuitive once you understand the different filter categories.

You'll see three main tabs:

  • Descriptive: Filters based on company characteristics like market capitalization, industry, and country.
  • Fundamental: Filters based on financial ratios and metrics, such as P/E ratio, EPS growth, and debt levels.
  • Technical: Filters based on price and volume data, such as moving averages, relative strength, and chart patterns.

For finding growth stocks, we'll primarily focus on the Fundamental and Descriptive tabs, but the Technical tab can be useful for confirming trends.

3. Setting Your Initial Filters: The Descriptive Tab

Let's start by narrowing down our search based on some basic company characteristics. Here's a good starting point:

  • Market Cap: Consider filtering for "Mid," "Large," or "Mega" cap companies. Smaller companies can offer higher growth potential, but also come with higher risk. Larger, more established companies may offer more stability, but potentially lower growth rates. Experiment with different market cap ranges to see what results you get.
  • Industry: Select the industries you're interested in. Technology, healthcare, and consumer discretionary are often fertile grounds for growth stocks. You can select multiple industries by holding down the Ctrl (or Command) key while clicking.
  • Country: Typically, focusing on US-based companies simplifies research and access.

These initial filters will significantly reduce the number of stocks you need to analyze.

4. Identifying Growth Potential: The Fundamental Tab

This is where the real magic happens. The Fundamental tab allows you to filter stocks based on key financial metrics that indicate growth potential. Here are some crucial filters to consider:

  • EPS Growth Next Year: This is a critical filter. Look for companies with projected EPS growth of at least 15-20% or higher. This indicates analysts' expectations for future profitability.
  • EPS Growth Past 5 Years: While past performance doesn't guarantee future results, a history of strong EPS growth is a positive sign. Aim for at least 10% or higher.
  • Sales Growth Past 5 Years: Similar to EPS growth, a consistent track record of revenue growth is essential. Again, aim for at least 10% or higher.
  • Return on Equity (ROE): ROE measures how effectively a company is using its equity to generate profits. A high ROE (above 15%) suggests efficient capital allocation.
  • Debt/Equity Ratio: While growth companies often take on debt to finance expansion, it's important to ensure they're not overleveraged. A Debt/Equity ratio below 1 is generally considered healthy. You can adjust this based on the specific industry.
  • Price/Earnings to Growth (PEG) Ratio: The PEG ratio considers a stock's P/E ratio relative to its earnings growth rate. A PEG ratio of 1 or less is often considered undervalued, while a ratio above 2 might suggest overvaluation.

Example: Let's say you want to find technology companies with strong expected earnings growth. You might set the following filters:

  • Descriptive: Industry = Technology, Market Cap = Mid
  • Fundamental: EPS Growth Next Year > 20%, Sales Growth Past 5 Years > 10%, ROE > 15%

5. Using Technical Indicators to Confirm Trends

While the Fundamental tab helps you identify companies with strong growth potential, the Technical tab can help you confirm whether the market is recognizing that potential. Consider using these filters:

  • Price > 200-Day Simple Moving Average: This indicates the stock is in an uptrend.
  • Relative Strength Index (RSI): While not strictly a growth indicator, an RSI between 30 and 70 suggests the stock isn't overbought or oversold. You can use this to avoid chasing momentum.
  • Average Volume: Ensure the stock has sufficient trading volume to avoid liquidity issues.

6. Analyzing the Results and Conducting Further Research

Once you've applied your filters, Finviz will display a list of stocks that meet your criteria. Don't blindly invest in these stocks! This is just the starting point.

For each stock that catches your eye, conduct further research:

  • Read the company's financial statements (10-K and 10-Q filings).
  • Read analyst reports.
  • Understand the company's business model and competitive landscape.
  • Assess the quality of management.
  • Consider the risks associated with the investment.

7. Refining Your Strategy and Adapting to Market Conditions

The stock market is constantly evolving, so your growth stock screening strategy should be flexible. Regularly review your filters and adjust them based on market conditions and your investment goals.

  • Pay attention to sector rotation: Certain sectors may be more favorable for growth investing at different times.
  • Monitor economic indicators: Economic growth can fuel corporate earnings growth.
  • Stay informed about industry trends: Identify emerging trends that could drive growth in specific sectors.

8. Common Mistakes to Avoid

  • Chasing hot stocks: Don't get caught up in hype. Focus on companies with solid fundamentals and sustainable growth potential.
  • Ignoring valuation: Even growth stocks need to be reasonably priced. Don't overpay for future growth.
  • Neglecting risk management: Growth stocks can be volatile. Diversify your portfolio and use stop-loss orders to limit potential losses.
  • Relying solely on Finviz: Finviz is a powerful tool, but it's not a substitute for thorough research.

Conclusion: Your Growth Stock Hunting Journey Begins

Finviz provides a powerful and accessible platform for identifying potential growth stocks. By understanding the key filters and conducting thorough research, you can significantly increase your chances of finding the next market leader. Remember to stay disciplined, adapt to changing market conditions, and never stop learning. Happy hunting!