Find UK Growth Stocks with Free Tools
To find growth stocks, we’re going to start off with a quick definition of a growth stock and then define exactly what we are looking for.
According to Investopedia, ‘A growth stock is any share in a company that is anticipated to grow at a rate significantly above the average growth for the market.’
And Wikipedia says, ‘A growth stock is a stock of a company that generates substantial and sustainable positive cash flow and whose revenues and earnings are expected to increase at a faster rate than the average company within the same industry’.
To put it quite simply, the focus is not the dividend income, more the fact the revenues, earnings and ultimately the stock price is likely to rise fast.
What to look for in a potential growth stock
Following on from Wikipedia’s definition we are going to focus today on just a couple of factors. These are that Revenues/sales are growing and that earnings/profits are growing too.
With so many metrics out there, different investors work in different ways and of course just because it seems like it’s growing fast, doesn’t mean that it will continue to do so or that it is financially stable. When we look for great stocks, we consider other fundamentals such as financial stability, future growth potential and reasonable value.
Where to find growth stocks
One way is to look for global trends and looking for stocks that lead in that space. Recent growth sectors have included Blockchain & Crypto, Artificial intelligence and ESG companies. But there are always disruptive stocks that grow rapidly in every sector.
You can google growths stocks for articles or check out YouTube or social media sites and such as twitter and facebooks for threads and groups. But be careful, when people are pushing growth stocks, it may well mean that they own it, especially smaller companies. Always try to do your own checks.
Our favourite way is to filter out growth stocks is by use of a screener.
As we know roughly what metrics we are looking for, a stock screener makes the ideal finding place. We’ve already done a post on the best free screeners for UK companies. So in this post I’m going to work through using 2 of our favourite free stock screeners.
For UK Stocks we largely use ADVFN or Investing.com
Screening UK Growth Stocks with ADVFN
The quick way to do this is by using the ‘Advanced Search’ feature on under the ‘Financials’ menu. https://uk.advfn.com/p.php?pid=financials Here you can filter by a wide range of statistics and ratios.
The key stat we use when filtering for growth stocks on ADVFN is EPS (Earnings per Share) Growth Rate. Return on Equity is also another common stat to use for growth stocks. You will also be checking sales revenue growth although ADVFN doesn’t appear to have a filter for this.
The downside with this is that you won’t get a table with all the data, so I prefer to go onto the FilterX page also found under the Financials menu. You can also download your results into Excel with all the stats.
You can set up a login for free and this will suffice.
Once in the filtered page you can pick your stats, I have set up and saved a filter.
The key stats we use for growth stocks are:
EPS Growth Rate > 25
Return on Equity (ROE) > 12
Other filters you might like to include for comparing stocks are:
Value Filters including: P/E ratio, PEG ratio,
Financial Stability Filters such as: Current ratio, Total Debt/Pre Tax Profit, Interest Coverage.
Profitability Filters including: Return on Assets (ROA), Operating Margins.
On most sites you’ll be able to check out definitions of each of the filters.
It’s worth noting that financial companies tend to have a different way of accounting, so if you are considering buying finance stocks, you may want to adjust these figures, but make sure you really drill down into the accounts and statistics.
If you click on the filter heading, you can sort by that column. For example clicking on EPS growth rate will show you that there are some huge growth rates and probably too many stocks to manually work through.
So on ADVFN I’ve saved a filter, it can be seen under ‘My filters’. Next, I download this to CSV. Here I can start filtering by my favourite stats. The list drops down quite quickly. It’s not a perfect measure as some stocks don’t have all stats and can be missed out.
Some people will disagree with too many filters but having made mistakes over the years I’d much prefer to miss out on a few opportunities than to take on overly risky ones. One major example of this is with dividends. Some people say that growth stocks don’t have to have dividends, however I personally see dividends as a sign that the company care about their investors, but also this is an insurance, if the stock does fall you will at least be getting something back.
To filter in Excel under the home tab click ‘sort & filter’ and for example under the Earnings Ps – growth rate tab I’ll set this as a number filter to greater than 25.
Once I’ve shortened my list to say 20 stocks I’ll then start researching each one.
Screening UK Growth Stocks with Investing.com
I found that with investing.com if I have too many filters I missed out on too many stocks. So I have set up a filter with just the most basic of growth filters.
Sales (MRQ) vs Qtr. 1 Yr. > 25%
Sales (TTM) vs TTM 1 Yr. > 25%
EPS(MRQ) vs Qtr. 1 Yr. Ago > 25%
EPS(TTM) vs TTM 1 Yr. Ago > 25%
MRQ is Most Recent Quarter & TTM is trailing 12 months.
If you try both ADVFN & Investing.com you’ll find that you should get many similar stocks, but they may well throw up a few different ones too. You can also download the stats on Investing.com.
So these are just a couple of ways of quickly getting growth stock ideas. There are no hard and fast rules for the filters you use or the figures you use. If you find that you end up with a list of too many stocks to check, just make the requirements harder.
Hopefully you’ve found this post useful and enjoy hunting for growth stocks!
