Stock screening methods

 

Stock screening is the process of filtering and shortlisting stocks based on specific criteria to identify potential investment opportunities. It helps narrow down thousands of stocks to a manageable list based on your investment goals—value, growth, dividend, momentum, etc.

---

🧠 Purpose of Stock Screening

• Identify high-potential stocks

• Match stocks to your strategy (value, growth, income, etc.)

• Save time by filtering out irrelevant options

• Avoid emotion-based investing

---

🔍 Categories of Stock Screening Methods

1. Quantitative Screening

Focuses on numerical filters based on financial ratios, earnings, and market data.

🔹 Common Filters:

Metric	Purpose
P/E Ratio	Valuation
ROE / ROCE	Profitability
Debt-to-Equity	Leverage/Risk
Current Ratio	Liquidity
EPS Growth Rate	Earnings momentum
Market Cap	Company size
Dividend Yield	Income generation
Price-to-Book (P/B)	Asset valuation

🧮 Used for: Value investing, growth investing, GARP, momentum investing

---

2. Qualitative Screening

Uses non-financial factors like:

• Brand reputation

• Industry position

• Management quality

• Moat (competitive advantage)

• ESG (Environmental, Social, Governance) scores

🧠 Used by: Long-term investors and analysts for deep-dive analysis

---

3. Technical Screening

Filters based on price and volume indicators like:

• RSI (e.g. RSI < 30 for oversold)

• MACD crossovers

• 50-day/200-day moving average breakouts

• Volume surge

• Bollinger Band breakout

📈 Used for: Swing trading, technical momentum strategies

---

4. Hybrid Screening

Combines fundamental + technical filters.

📌 Example:

• P/E < 15 (Value)

• ROE > 15% (Quality)

• RSI between 40–60 (Neutral momentum)

• Above 200-day MA (Positive trend)

🧠 Used for: Smart momentum/value trades

---

🧰 Popular Stock Screeners (India & Global)

Platform	Features	Best For
Screener.in	Free, powerful custom screens, financials	Indian fundamentals
TradingView	Technical + fundamental filters	Chart-based investors
Tickertape	Smart filters + scorecards	Beginners & retail users
TIKR	Deep global fundamental data	Global value/growth investors
Finviz	US stock screener with technical filters	US market quick analysis
Yahoo Finance	Basic filters + news	General overview
Investing.com	Global filters + charts	Swing traders & analysts

---

🛠️ Sample Screening Strategies

🔵 Value Investing Screen (Benjamin Graham Style)

• P/E < 15

• P/B < 1.5

• Debt/Equity < 0.5

• Current ratio > 1.5

• ROE > 12%

---

🟢 Growth Investing Screen

• Revenue CAGR > 15% (5 years)

• EPS growth > 20%

• ROE > 20%

• Low to moderate debt

• PEG < 1.5

---

🔴 Dividend Investing Screen

• Dividend yield > 3%

• Payout ratio < 60%

• Consistent dividend history (5+ years)

• Free cash flow positive

• Stable earnings

---

🟡 Momentum Trading Screen

• Price > 50-day and 200-day moving average

• Volume surge > 50% average

• RSI between 50–70

• Market cap > ₹1000 Cr

• Beta > 1.2 (volatility)

---

✅ Best Practices for Effective Screening

1. Start broad, then narrow down

2. Customize your screen for each strategy

3. Compare results to peers or index benchmarks

4. Validate results with deep fundamental or technical research

5. Regularly update filters based on market conditions

---

📋 Summary Table

Screening Type	Criteria Example	Best For
Quantitative	P/E, ROE, EPS, D/E	Value, growth, dividend
Technical	RSI, MA crossover, MACD	Swing traders, momentum
Qualitative	Moat, governance, brand	Long-term investors
Hybrid	Value + Trend	Quality & momentum combos