There are thousands of stocks traded in the market, and only a part of them are good growth stocks. What if you had a tool that would quickly find you the promising ones so you can spend more time going deep into value?
There are many things to check with a growth stock. To increase certainty the number of things to check and research is increasing as well. In my opinion, it would be a good idea to screen stocks for those that have a potential to grow and spend more time only on those.
Thinking about this, I found three attributes that give quite an idea into what kind of stock are you looking at.
I believe that in order for a stock to grow decently, its revenue has to grow. (it can improve costs etc, but most of the other changes have limited space for growth).
Second, for a growing stock, the company is in a much better position, if it has left over cash after costs of revenue and operations. So it is good to have a positive operating and free cash flow. This is usually the money the company can invest into growth without asking for outside money.
Third question is — how expensive it is to buy into the stock now? One of the indicators is P/E ratio.
So to make searching for companies with potential growth prospects faster, I have this searchable chart below. Revenue growth is displayed along the vertical axis and operating cash flow on the horizontal. I immediately see the P/E ratio category based on the color of the each dot — each company.
The chart looks like this:
So let’s say you would like 0.2 (20%) revenue growth and $5B operating cash flow. You can find the place on the chart and you would like to find the matching companies. Just like on the image below:
This way you quickly filtered out a nice promising company and can go on looking deeper into its fundamentals.
Because I really liked this process, I put it together into a chart here: bullandbearlist.com.
The are zoom in and out buttons with mouse dragging the chart to get into an area you like. Then you can hover or click on the red/green/gray dots. Ctrl+click is going directly to the financial details of that company with visualizations.
This way anybody can benefit from this approach and find growth companies with the right profile for them much faster. Then screen their financials to see those worth looking at more. I believe, that saving time in this first stage of the process gives everybody much more time to focus on the quality stocks and really find the ones to do best with.
In bullandbearlist.com we build tools for regular people to search for high potential companies. Please note that all investments entail risk and these are just my opinions, not a professional financial advice. I am not a professional financial advisor. I may or may not hold positions in mentioned companies.