Stock Screening and Choosing a Stock Screener

Stock screening is the practice of finding companies that satisfy particular financial criteria. A stock screener has three elements: a directory of companies; a set of predetermined variables; and a screening engine that spots the companies that suit those variables and produces a list of matches.

It’s easy to use a screener. First you answer a number of questions like:

> Which do you prefer: large-cap stocks or small-cap stocks?

> Are you aiming for stock prices at all-time highs, or companies whose stock prices have decreased?

> What price-to-earning (P/E) ratio range will you be comfortable with?

Good screeners let you search with just about any criteria you want. After inputting your answers, you will be given a list of stocks fulfilling your requirements. When you focus on the scientific factors that impact a stock’s price, stock screeners aid users in conducting quantitative analysis. Hence, screening mainly deals with concrete variables like profit margins, market capitalization, volatility and revenue, and also P/E, debt-to-equity and other performance ratios. You obviously cannot use a screener to find a company that, say, “offers the best products.”

Basic Screeners or Custom Screeners?

Basic screeners have an encoded set of variables where you simply assign the values as your criteria. On the ABC basic screener, for instance, there is a variable that examines stocks according to market cap, allowing you to find companies that are above or under the $400 million mark in market capitalization. Though there are a few good free screeners available, if the latest and the best technology can only come from a screening service subscription.

Screening Criteria

The most challenging part of using screens is setting the criteria for your search. With tons of variables, there can be almost endless combinations and possibilities. Screeners are significantly flexible, but if you’re not clear about what you want and why you want it, the benefits you get will be limited. To provide assistance to investors, some sites have preset stock screens, where variables have already been encoded.

What to Look Outfor When Using Stock Screeners

Again, while they are helpful tools, free stock screeners are limited. Keep the following in mind:

1. Stock screeners mostly include only measurable factors.

For your part, you must also consider qualitative matters, such as labor problems, pending lawsuits, and the like.

2. Screeners have databases updating at different schedules.

Be sure to check how fresh the new data are – if they’re old, your search would be of little or no value.

3. Pay attention to industry-specific blind spots.

If you are trying to find low P/E valuations, for example, don’t think there will be many tech firms coming up.


Stock screeners are no magic pills for stock selection, but a good one can help put you in the right direction. And as good screeners require resources to construct, you should never hesitate to invest in a well-crafted product.

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