How to Use Stock Screener to Invest September 22, 2020
Reading time: 5 minutes
Are you always running out of ideas on which counters to buy? With thousands of counters available on the stock market, finding the “ideal” counter to invest is akin to searching for a needle in a haystack. It takes a lot of legwork to find the best stocks, but the good news is, technology makes it near effortless!
In this guide, we will explain how you can utilise the Stock Screener tool to identify potential stocks worthy of your attention.
What is a Stock Screener?
Stock Screener is a tool that allows you to filter counters based on fundamental metrics such as market capitalisation, dividend yield and financial ratios.
Simple yet broad in coverage, the POEMS Stock Screener allows you to screen and select counters easily with a wide range of criteria based on important ratios and figures. With the sheer volume of companies listed on the stock market, this tool saves you the time by narrowing down your options to display counters that possess the specific traits you are looking for.
How to use a Stock Screener to invest?
The Stock Screener tool is used by many investors to find counters that conform to their search criteria, find new stock ideas, as well as build and diversify a strong portfolio.
POEMS Stock Screener provides numerous fundamental search criteria for you to filter from across all industries and a wide range of markets. Investors and traders can utilise this tool to filter the Price and Valuation, Growth and Margin Rates, as well as Financial Ratios.
- Price and Valuation – includes two search filters, a counter’s last closing price and market cap to identify small, mid, or large companies
- Growth and Margin Rates – includes key metrics such as Return on equity (ROE), Return on assets (ROA), Operating Margin, Earnings per share (EPS) Growth and Dividend Yield
- Financial ratios – includes key ratios such as Price-to-Earnings (P/E), Price-to-Book (P/B) and Debt/Equity
Before using the tool, you must understand what the different ratios represent so that you can utilise them more effectively in your analysis.
1. Market Cap, or Market Capitalisation tells the size of a firm based on its market value. This ratio provides information about a company’s growth potential and stability. There are six types of market cap:
2. Revenue Growth is often an indication of a healthy company and this figure should at least keep up with the rate of inflation.
3. EPS (Earnings per Share) Growth provides an idea of how the company has grown in terms of profitability.
4. Dividend Yield (%) can be a signal of clear financial health and confidence for a company to pay out dividends.
5. P/BV (Price-to-Book) ratio allows you to determine if a company is over or undervalued. Generally, a P/BV of less than one suggests that a stock is undervalued while anything above 1 may indicate that a stock is overvalued.
To get started, here are some questions that you may want to ask yourself to abet your search for stocks that meet your requirements:
- Is there a specific market and/or industry you are looking at?
- Are you interested in small, mid or large cap companies?
- What is an acceptable dividend yield range?
- What is an acceptable P/E range?
For example, if you are looking to find undervalued stocks among mid-cap companies with at least a 5% dividend yield, simply key in these criteria in the relevant boxes and you will find the search results at the bottom.
The information above is meant for illustrative purposes and is not a recommendation to buy, sell or hold this security. The figures are current as of August 2020.
Looking for the “ideal” stocks can be a long and tedious process. Fortunately, the stock screener tool is a convenient way to comb through an exhaustive list of stocks to find the counters that meet your unique parameters.
While Stock Screeners are a great way to identify counters that match your search criteria, it is also important to conduct further analysis on the companies to make more informed investment choices. A great complement to this tool is Stock Analytics (click here to learn how you can utilise Stock Analytics to enhance your investment decisions).
Discover counters across multiple exchanges worthy of your attention with POEMS Stock Screener. Available on POEMS 2.0.
POEMS suite of trading platforms is made to suit the needs of all traders and investors. Open a Cash Plus Account to enjoy commission fee as low as 0.08%, no minimum* when you trade equities. Jumpstart your investing journey with POEMS now!
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