How to Use a Stock Screener

Investor opinions vary widely as to how to determine which company’s stocks are good investments although the most experienced investors will use at least a handful of financial indicators to guide them rather than relying on hype and secrets overheard in a lounge. A few of the indicators and factors that investors use are as follows:

  • Industry – Some investors choose stocks only in specific industries or avoid others
  • Growth Estimates – These are compiled by analysts and usually are stated as:
    • Estimated 1 year EPS growth
    • Estimated 5 year EPS growth
    • Average Analyst Recommendation (buy, sell, hold)
  • Valuation Ratios – A numerical calculation based on financial figures, such as:
    • PEG Ratio
    • Price/Sales Ratio
    • Price/Earnings Ratio
    • Price/Book Ratio
  • Income and Financial Figures – items from the company’s financial statements, and calculations such as:
    • Profit Margin
    • Sales Revenue
    • Net Profit
    • Net Profit Margin
    • Debt/Equity Ratio
  • Share Data – items specific to the stock itself, such as:
    • Share price
    • Dividend
    • Dividend Yield
    • Volatility
    • Market Cap
  • Stock Market Data – ratings and information, such as:
    • S&P Index
    • Dow Jones Index
    • Average Daily Volume
    • 12-month Relative Strength

It would appear that much research would need to be done to painstakingly determine which stocks meet the specific requirements that an investor is looking for. In the days before the Internet, it was certainly tedious and best left for only the very best financial advisors. However, luckily now it is as simple as using a stock screener. It is not difficult to know how to use a stock screener and there are many sites available online to do so. Some sites such as Yahoo! Finance and MSN Money have simple-to-use sites in which you simply use drop-down menus to choose the range you require for any of the given indicators.  The stock screener on the CNBC site lets you choose from five different pre-defined screens:

  • Solid Stocks Solid Companies – lists steady performers
  • S&P 500 Dogs – lists high dividend yields on large cap companies
  • High Quality High Dividends – lists those that pay out high dividends
  • Small Cap Value – lists small cap stocks
  • Large Cap Growth – lists large cap stocks

From these re-defined screens you then select custom criteria options.

There are also a number of companies that provide fee-based services to enable investors a more customizable search ability function. So now the only trick is figuring out what your criteria is and let the power of the Internet guide you to the stocks that fit.