How to Find Value Stocks on Finviz
Why Value Stocks?
Before we dive into the step-by-step guide, let’s understand why value investing remains an attractive approach. Value stocks are those that trade for less than their intrinsic value, meaning the stock's market price is lower than its worth based on fundamentals like earnings, revenue, and book value. Investors who buy value stocks are banking on the fact that the market will eventually recognize this and the stock price will rise.
This strategy has been popularized by legendary investors like Warren Buffett and Benjamin Graham, whose methodologies revolve around finding companies that are temporarily mispriced by the market.
Why Use Finviz?
Finviz is a powerful stock screener that allows you to filter thousands of stocks using customizable filters. The beauty of Finviz lies in its easy-to-use interface and comprehensive filtering options, making it a perfect tool for identifying value stocks without needing to manually sift through mountains of financial data.
By understanding the filters and how to configure them, you can pinpoint undervalued stocks with high growth potential, solid fundamentals, and limited downside risk.
Getting Started: Finviz Stock Screener Overview
Once you navigate to Finviz.com, click on the “Screener” tab to access the stock screener tool. Here, you’ll see multiple options for filtering stocks based on fundamentals, technical analysis, and descriptive factors. For value stocks, we’ll focus on a combination of fundamental analysis filters.
Let’s break this down into steps:
Step 1: Market Capitalization
To begin, select the Market Capitalization filter to define the size of the companies you’re interested in. Generally, value investors target mid-cap and large-cap stocks, as these companies tend to be more established, with stable earnings and cash flows. Choose options like Mid Cap ($2 billion to $10 billion) or Large Cap ($10 billion and above) based on your risk tolerance.
For those willing to take on higher risk, small-cap value stocks could be a potential goldmine, but they also come with more volatility. If you're a more conservative investor, stick to larger companies with proven track records.
Step 2: Price-to-Earnings (P/E) Ratio
One of the key indicators of a value stock is its P/E ratio, which shows how much investors are willing to pay for each dollar of earnings. In general, value investors look for stocks with a P/E ratio below 15. To set this on Finviz, go to the Fundamental section and choose P/E < 15. This filter ensures you're looking at stocks that are relatively inexpensive compared to their earnings.
Additionally, it might be helpful to set an upper threshold for the P/E ratio. For instance, setting P/E under 25 ensures you avoid overvalued stocks in booming industries, which might be expensive due to hype rather than fundamentals.
Step 3: Price-to-Book (P/B) Ratio
Another crucial ratio to evaluate is the P/B ratio, which compares the stock price to the company's book value. A P/B ratio of less than 1 indicates that the stock is trading below its book value, which could signal an undervalued opportunity. In Finviz, select P/B < 1 to find such companies.
A P/B ratio between 1 to 2 can also be considered, depending on the industry. For example, certain tech companies naturally have higher P/B ratios, while industrial or financial companies may have lower ones.
Step 4: Dividend Yield
Many value stocks come with the added benefit of paying dividends, which can enhance your overall return on investment. You can use Finviz to find stocks that offer dividends by setting the Dividend Yield filter to Above 2%. This ensures that not only are you buying undervalued stocks, but you are also getting a steady income from your investments.
Step 5: Debt-to-Equity Ratio
When searching for value stocks, it’s crucial to examine a company’s financial health, particularly its debt levels. A high debt-to-equity ratio may suggest financial instability, which could lead to trouble if the company’s earnings falter. In Finviz, set the Debt/Equity ratio to under 0.5 to find companies with low leverage and a strong balance sheet.
Step 6: Insider Buying
One powerful yet often overlooked indicator of a company’s potential is insider buying. When insiders—executives or board members—are buying large amounts of stock in their company, it typically signals confidence in the company's future. In the Finviz screener, you can select Insider Buying as a filter under the “Signal” section. This can help you zero in on companies where those in the know are putting their money on the line.
Step 7: Analyst Upgrades
Another effective filter on Finviz is Analyst Upgrades, which can serve as a catalyst for stock price increases. Analysts closely monitor financial data and company performance, so a recent upgrade could indicate that a company is finally gaining recognition in the market. By selecting Recent Analyst Upgrades, you can combine value metrics with market sentiment to spot stocks that are poised for future growth.
Step 8: Earnings Growth
Lastly, look for companies that are not just undervalued but also have strong earnings growth prospects. Select EPS Growth this year > 10% in the Finviz screener to focus on stocks with both current undervaluation and strong potential for earnings expansion.
An Example of Finding a Value Stock
To see this in action, let’s say you want to find value stocks in the industrial sector. After setting the filters:
- Market Cap: Mid Cap
- P/E < 15
- P/B < 1
- Dividend Yield > 2%
- Debt/Equity < 0.5
You can further refine the list by looking for stocks with recent insider buying and analyst upgrades. The result might give you a list of companies that have solid fundamentals, are trading below intrinsic value, and offer additional upside through dividends and growth potential.
The Benefits of Using Finviz for Value Stocks
The key advantage of using Finviz is that it allows you to focus on multiple criteria simultaneously. This level of customization helps you eliminate noise and identify only those stocks that meet your exact requirements, whether you're focused on low P/E ratios, dividend yields, or insider buying activity.
Moreover, Finviz offers both basic and elite versions. While the basic version is sufficient for most retail investors, the elite version offers real-time quotes, advanced charts, and additional screeners, making it a valuable tool for more active traders and investors.
Key Takeaways for Finding Value Stocks on Finviz
- Finviz allows you to filter thousands of stocks with custom criteria, making it easier to identify undervalued companies.
- Use fundamental filters such as P/E ratio, P/B ratio, Debt/Equity ratio, and Dividend Yield to spot stocks that are trading below their intrinsic value.
- Pay attention to signals like insider buying, analyst upgrades, and earnings growth to find stocks with strong potential for future appreciation.
- Finviz’s screener can help you build a diversified portfolio of value stocks that offer not only capital appreciation but also income generation through dividends.
By utilizing these steps, you'll be on the path to discovering value stocks that have been overlooked by the market but hold substantial potential for long-term gains. Happy investing!
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