What a stock screener is for
A stock screener is a tool that filters a large list of listed shares down to the companies that meet every condition you set. It does not decide what to buy. It only shows you where to look first, which is why a good stock selection guide still matters. The task is to set a few clear conditions, run the screen, and review the shortlist before you spend any money.
Before you start
Check a few things before you open any tool. A screen is only as useful as the goal behind it.
- Decide what kind of company you want to find, such as steady dividend payers (companies that pay part of their profit to shareholders) or faster growing smaller businesses.
- Confirm which markets the tool covers, since a screen can only search the exchanges and countries it holds data for.
- Check how often the data is updated and which financial period the figures cover.
Steps to run a screen
Work through the steps in order, so each filter is added for a clear reason.
- Open the screener and choose the market you want to search.
- Set a size filter using market capitalisation, the total value of a company's shares, and pick a sensible range.
- Narrow by sector to keep only the industries you can follow.
- Use a valuation filter, such as the price to earnings ratio, which is the share price divided by earnings per share.
- Apply a growth filter, such as revenue growth over the last few years.
- Run the screen and note how many companies remain.
- Review the shortlist by reading each company's own filings.
- Save the screen so you can rerun it later and see what has changed.
Choosing filters for size, sector, valuation and growth
Size filters separate large, well-established companies from smaller ones. Smaller companies can grow faster, but they often carry more risk and their share prices can move more sharply.
Sector filters keep the search inside industries you understand. Valuation filters show whether a share is priced high or low relative to its earnings, sales or assets. Growth filters show how quickly revenue or profit has risen over time.
Each filter you add narrows the list further. Start with a few broad conditions, then tighten them only when the list is still too long. Most tools apply your conditions together, so a company must pass all of them.
Over-filtering is an easy mistake to make. When every condition is strict at the same time, the list can end up empty or hold only a handful of companies that fit an unusually narrow pattern. If that happens, loosen the strictest filter first and run the screen again.
What a screener cannot tell you
A screener works only with the data it holds. It cannot judge the quality of a company's management, the strength of its competitors or the risks in its business model. Figures can also be delayed, restated or calculated differently between tools.
A screen produces a shortlist, not a recommendation. Read the company's own annual report and check the risks it sets out. Investing involves the risk of losing money, and the value of shares can fall as well as rise.
When a screen returns too few or too many results
If the screen returns no results, loosen the strictest filter and run it again. Too many companies call for a further condition, such as a tighter growth range or a narrower sector.
When the results look wrong, check the date of the data and the definition the tool uses for each figure. Different tools can label the same measure in different ways, so compare definitions before you trust a list. If the tool reports an error, note its wording and check the provider's help information.
Screener quality differs between brokers
Screening quality varies between providers. Some tools cover more markets, update their figures more often or offer a wider range of filters. Differences like these matter when you compare stock brokers or investing research tools, so look at screening features as well as the cost of trading.
Check the provider's own information for the exact filters it offers and the markets it covers, since these vary by provider and by country.