The Indian stock market has 4000+ listed stocks. Choosing the most suitable stocks from them is crucial. This is where stock screeners come into play.
A stock screener is a tool that helps investors sort through thousands of stocks based on specific parameters such as price-to-earnings ratio, market capitalisation, dividend yield and hundreds of other ratios, which we will discuss in our article.
In simple words, it is an optimisable search engine for stocks that helps you save a lot of time and get the right stock according to your investment needs.
As you can see in the image below, using a stock screener, we found a list of 102 stocks with a market cap of more than ₹ 1,00,000 Cr in seconds.
A screener has numerous benefits, such as:
- Time-Saving: Let you narrow down the most suitable stocks within minutes.
- Targeted Research: You can target the most suitable stocks having the filters you need.
- Objective Analysis: Helps you pick better stocks by removing emotional prejudice from the decision-making process.
- Market Exploration: Simplify exploring stock ideas, investment styles, and industries.
Now that you have all the knowledge you need about stock screeners, you must be wondering, “How would I know which is the best stock screener for Indian stocks?” Well, worry not.
We’re here to guide you through the top 5 ways on how to use screener to pick great stocks:
- Dividend Screener
- Penny stock screener
- Blue chip stock screener
- Undervalued stock screener
- Custom screeners
You can also use ready-made screens based on various strategies using Finology Ticker Bundles.
1. Dividend Stock Screeners
Imagine having a stake in a company that rewards you simply for being an owner. That’s the beauty of dividend stocks!
It is one of the most preferred forms of investment for those who expect a steady income from their shares. These stocks usually belong to companies with a track record of excellent financial health.
Owning high dividend-paying stocks has multiple benefits, such as:
- Regular income
- Growth potential
- Less volatility
- Equity valuation
- Tax advantages
So, let’s find out how we can pick high dividend-paying stocks using a screener.
Top Dividend Stocks
You can screen for top dividend-paying stocks on Finology Ticker for free by simply following these steps:
- Visit Stock Screener
- Sign up or Log in for free.
- Type the query “ MCAP > 100 AND Yield TTM > 2 AND DPS Y1 > DPS 5yr Avg AND Net Profit 3yr CAGR > 5 AND ROE Y1 > 10 AND Dividend Payout 5yr Avg > 10 AND DPS Y1 > 10 ”
- Click on “Run Screener”
- Voila! Get results in seconds.
Here’s an image of top dividend stocks that we found using the above steps. They provide decent fundamentals as well.
(Source: Finology Ticker’s Stock Screener)
Factors to consider when using a Dividend Screener
- Dividend Yield: This is the percentage of the current stock price that a company pays out as dividends. A higher yield represents a greater income earned from the investment than its cost.
- Payout Ratio: It is the portion of a company’s earnings that is returned to shareholders in the form of dividends. A low payout ratio may indicate the potential for increasing dividends, whereas a very high ratio could signal sustainability concerns.
- Dividend Growth Rate: This rate shows how much per cent a company raises its dividends annually over a specific period. Continuity in growth rate indicates the efficiency of the company’s financial position.
- Sales and Profit Trends:
- Profit & Loss: Look for firms with expanding sales and earnings, for these are the key determinants of a firm’s ability to sustain payments.
- Financial Data History: Analyse the long-term trends and evaluate the stability, growth and resilience during economic changes.
2. Penny Stock Screeners
Penny stocks, popularly referred to as stocks trading for less than ₹30 (or, for some people, less than ₹50), are usually considered the ‘Wild West’ of stock investing.
Penny stock screeners are exciting, but you have to consider some factors before buying them. They could potentially make you rich, or you could lose all your money.
The good stuff:
- High Returns Potential
- Low-Cost Entry
- Access to Emerging Companies
The bad stuff:
- Lack of Transparency
- High Volatility
- Market Manipulation
- Financial Instability
So before using penny stock screeners, you should know both the advantages and disadvantages.
Top Penny Stocks
Penny stock screeners are a double-edged sword. You can screen for top penny stocks on Finology Ticker for free by simply following the same steps as you did for Dividend Stocks but the query will be different.
Use this query to screen penny stocks – “Current Price < 50 AND Net sales 3yr CAGR > 8 AND ROE 3yr Avg > 8 AND Net Profit 3yr CAGR > 8 AND MCAP > 50 AND CFO by PAT 5yr Avg > 1 AND EPS 3yr CAGR > 8”
Here’s an image of the top penny stocks that we found using the above steps.
(Source: Finology Ticker’s Stock Screener)
Factors to consider before screening penny stocks:
Apart from the risks and rewards, there are various other factors that need to be evaluated when screening penny stocks to invest in:
- Market Capitalisation: When looking for penny stocks, consider those with a market cap that fits your risk tolerance. Stocks with smaller market caps may come with increased volatility and risk, while those with larger market caps could provide more stability.
- Price Per Share: Penny stocks are generally priced below a specific limit (for example, ₹50 per share). Keep your budget and risk appetite in mind. While low-priced stocks enable you to purchase more shares, they can also be highly volatile.
- Fundamental Metrics:
- Revenue Growth: Focus on companies with steady and high revenue growth rates. Sustainable businesses are capable of posting better results in the long run.
- Earnings Per Share (EPS): A positive EPS indicates profitability. Negative EPS may signal financial distress.
- Cash Flow: Positive operating cash flow is vital for a company’s survival.
- Business Model and Industry: Know the company’s operations, product portfolio, and managers.
3. Blue Chip Stock Screeners
Blue chip stocks are the stocks of well-established, well-financed firms with a long history of profit-making. Therefore, they can be a great safe investment option. These market-leading industries are usually characterised by stability, regular earnings and often high dividends.
Why should you choose Blue Chip Stock Screeners?
- Large and established companies
- Financial stability and reliability
- Reliable dividends and income
These are the characteristics that make blue-chip stocks a great investment option.
Top Blue Chip Stocks
You can screen for top blue chip stocks on Finology Ticker for free by using stock screener and the steps we discussed above.
The query you have to use to screen blue chip stocks is
“MCAP > 50000 AND Current Ratio Y1 > 1 AND Debt to Equity Y1 < 0.5 AND EPS TTM > 0 AND PE Ratio > 20 AND Promoter Pledging Q1 < 10 AND Net sales 3yr CAGR > 10 AND Net Profit 3yr CAGR > 10 AND ROE 3yr Avg > 10 AND ROCE 3yr Avg > 10”
You can find a list of top blue-chip stocks in the image below.
(Source: Finology Ticker’s Stock Screener)
Factors to consider when screening blue chip stocks:
- Market Capitalisation: Blue-chip stocks usually have a very large market capitalisation, which reflects their stability and prominence. You should target companies with a large market capitalisation.
- Revenue Growth: Identify the company’s revenue flow patterns over time to ensure that the company sustains an excellent top line.
- Profitability and Earnings:
- Earnings Per Share (EPS): A positive EPS indicates profitability, and blue chips consistently generate earnings.
- Stable Profit Margins: Look for companies with consistent profit margins; wide margins suggest efficiency and competitive advantages.
- Financial Health and Balance Sheet:
- Low Debt-to-Equity Ratio: A solid balance sheet features manageable debt levels in relation to equity. Blue chips typically maintain solid financial positions.
- Cash Flow: Positive operating cash flow is crucial for ensuring the company can cover its expenses and invest in growth.
- Industry Position and Competitive Advantage:
- Market Dominance: Blue chip stocks are first in their industry category. Evaluate their positions in a specific market and their strengths.
- Moats (Differences): You should look for companies that are different from others in terms of factors that protect them from competition, such as network effects, cost advantages, switching costs, etc.
4. Undervalued Stock Screeners
Undervalued stocks are priced significantly lower than their actual value or worth in the market. The market price of the stock is less than what the company’s fundamentals, like cash flow, earnings, and growth potential, justify.
These stocks are like hidden gems in the stock market, and to identify them, there are certain factors that should be considered, such as:
- Low PE Ratio
- Low PB Ratio
- Low PEG Ratio
The above ratios should be compared with the company’s historical values and also relative to peers.
Top Undervalued Stocks
You can use the stock screener and the steps we discussed above to screen for top undervalued stocks on Finology Ticker for free.
The query used to screen undervalued stocks is
“PEG ratio < 1 AND PE Ratio > 0 AND MCAP > 500 AND PE Ratio < PE 3yr Avg AND PB Ratio < PB 3yr Avg”
In this image, you can see the top undervalued stocks found using the screener.
(Source: Finology Ticker’s Stock Screener)
5. Custom Screeners
Custom stock screeners are the Swiss army knives of the investment world. They allow you to filter and analyse stocks by combining various criteria to create a screening strategy perfectly aligned with you.
Why should you consider custom screeners?
- Alignment with Goals: Custom screeners enable you to define and build an investment universe that aligns with your financial goals and risk tolerance.
- Efficiency: By filtering through thousands of stocks and narrowing them down to only what meets your particular needs, you are left with the best opportunities out there.
- Hidden Gems: Customisation helps identify stocks that broader market screens may overlook.
- Adaptability: You might change your investment goals in the future, and you can easily adjust your custom screener accordingly.
How to effectively use custom screeners?
These are some practical tips for using custom screeners to get maximum benefits from them-
- Understand Your Goals and Criteria:
To get the best results using a custom stock screener, ensure you have a clear objective for your investment goals. Do you need growth stocks, dividend-paying stocks, value stocks, small-cap stocks, or any other kind of stock? Knowing your objectives will help you select the proper screening criteria.
- Combine Multiple Criteria:
Don’t rely on just a single parameter for screening. Incorporate several criteria to narrow down your search. This will enable you to find stocks that satisfy your investment plans. Best stock screeners always use strict filters to remove bad stocks.
- Conduct Due Diligence:
Research each company individually. Look for the balance sheets, income statements, and annual reports and also search for the latest news related to the company. You can get all these by clicking on any company page in Finology Ticker.
- Evaluate Screened Stocks Regularly:
Even after you’ve invested, do not sit and relax; keep monitoring your investment. Companies change over time. Keep revisiting your screening criteria occasionally to check and sell the stocks that are no longer suitable for your investment needs.
Bottom Line
Screener for stocks is indeed a powerful tool for investors. As we’ve discussed different types of screeners for indian stocks, let’s have a quick recap-
- Dividend screeners assist in identifying dividend stocks that are capable of generating sustainable income by evaluating aspects such as dividend yield, payout ratio and growth rate in dividends.
- Penny stock screeners are a bit risky to deal with. However, using several crucial factors, it can identify cheap stocks with great potential.
- Blue-chip stock screeners target well-established and reliable companies, which are identified after being filtered on factors such as large market capitalisation, consistent ROC, and sound financial ratios.
- Undervalued stock screeners analyse common ratios such as P/E, P/B and PEG, which assist in identifying stocks that could be undervalued in the market.
- Custom screeners enable you to filter various parameters to cover precisely the strategies of investing and objectives contemplated.
Using stock screeners can provide so much value because they enable you to go through many different stocks simultaneously and find the best ones that meet your requirements and investment strategies.
Plus, they are time-saving tools, promote impartiality, and can reveal opportunities that would remain unnoticed.
Picking the right stock can be overwhelming, but don’t get discouraged by the stress. Use the power of stock screeners to navigate through the stock market. Start exploring and screening, and take the first step to more informed investing.
