Stock Screen for Predictable Growth & Low Debt

Stock Screen for Predictable Growth & Low DebtIn the previous article we developed a value investing stock selection criteria based on companies that exhibit predictable growth in earnings, sales, and equity, and have low or no debt. This is called the PGLD criteria and we will now use a stock screener to see what stocks are able to meet it.

We will use the Finviz stock screener for this exercise, as it’s free and offers the ability to screen against virtually any fundamental, technical, or descriptive criteria possible. The only exception is BVPS growth which we will have to handle manually or with another tool.

Recommended reading: This post forms part of a series of steps outlined in, “Value Investing Workflow: The basic concepts“.

Following are the criteria we will be screening against initially:

  1. Earnings per Share (EPS) growth > 15% (avg. past 5 years with no year < 10%)
  2. Sales (revenue) growth > 15% (avg. past 5 years with no year < 10%)
  3. Book Value per Share (BVPS) growth > 10% (avg. past 5 years)
  4. Debt / Equity ratio < 0.1
  5. Market capitalization > $300m
  6. Stock price > $10
  7. Volume > 100k

We are able to immediately screen most of this criteria with Finviz directly. The next graphic shows a screenshot of the selected filter criteria (click to enlarge):

With the stock screener’s basic functionality, we’ve been able to screen 80% of our criteria directly. We have not been able to screen against criteria #3 BVPS growth, and we have not been able to verify that none of the EPS or sales growth rates for the past five years have been less than 10%. We will need to further screen the list manually against this criteria. This can be time consuming, but is useful time spent, as it forces the investor to become familiar with the numbers for each stock rather than relying solely on an automated screener. The Finviz screen based on the above criteria resulted in a selection of 88 stocks. Following is a screenshot of the first 20 results (click to enlarge):

We must now screen against the remaining BVPS growth criteria and 10% minimum EPS and sales growth criteria. To do this, we export the Finviz results to a spreadsheet, and utilize stock data available on msn money to fill in the missing information.

  • BVPS data can be found on msn money under Key Ratios -> 10-YR Summary.
  • EPS & sales data can be found under Fundamentals -> 10-YR Summary.

While going through this manual screening process, it may become apparent that some of the listed stocks aren’t suitable for reasons outside of our defined criteria. In going through this list, there were many stocks which had not been profitable for a portion of the past five years and eliminated these from the list, even if the growth rate was acceptable. My rule of thumb is that if there are any red flags at all at this early stage, drop them! There are more than enough high quality companies to choose from.

After secondary screening, the remaining stocks were divided into two tiers. Tier 1 stocks satisfied every criteria fully. Stocks identified as tier 2 might have missed a year or two of 10% growth, but otherwise met the rest of the criteria. These stocks will still be considered but will be scrutinized more carefully. Of the original 88 stocks, 13 stocks are listed in tier 1, and 24 were classified as tier 2 for a total of 37 stocks. In the next series of posts, we’ll begin to look at these companies in more detail, and begin the development of the watch list.

The full listing of stocks which passed the screen is shown below (click to enlarge):

Excel spreadsheet download

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6 thoughts on “Stock Screen for Predictable Growth & Low Debt

  1. […] Inc. was one of the stocks ranked tier 1 in a recent stock screen. The screen attempted to identify stocks that would exhibit predictable growth and that carry […]

  2. […] Laboratories (BRLI) was ranked tier 1 in a recent stock screen for companies that exhibited steady, predictable, growth with little debt. As part […]

  3. […] Wild Wings (BWLD) was one of the top performers in a recent stock screen for companies that exhibited steady, predictable, growth with little debt. As part […]

  4. […] quite some time now, and it didn’t come as a surprise to me that it scored very well in a recent stock screen I made for companies which exhibit high, predictable growth and little debt. Chipotle Mexican Grill’s […]

  5. […] Small presents Stock Screen for Predictable Growth & Low Debt posted at Stockodo, saying, “There are many online tools that enable investors to seek out […]

  6. […] prices of these large established companies don’t tend to get battered quite as badly as the small-cap growth stocks I usually pay attention to. Currently, my only exposure to the insurance industry is through my […]

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