Building a stock screen that finds what you mean
A screener is a filter over the whole market. You describe the stock you want in numbers, and it returns every listed company that matches. It is the fastest way to turn an idea into a list of names, and the easiest way to produce a list of names that have nothing to do with the idea. The difference is in how the criteria are written. This guide is about writing them well.
Start from the idea, not the metric
Every useful screen begins as a sentence. "Profitable companies growing faster than their industry whose stock has pulled back." "Cash rich businesses with no debt that the market has ignored." "Large, widely covered stocks where analysts have turned bearish." The sentence comes first because it decides which metrics matter and which are noise. A screen that starts from a menu of metrics ends up with twelve criteria that each seemed reasonable and a result set of three odd stocks.
Translate the sentence one clause at a time. Profitable means a positive net margin, or a return on equity above some level. Growing faster than the industry means revenue growth above the industry's typical rate. Pulled back means the price is some distance below its high, or the momentum label is bearish. Each clause becomes one criterion, and a criterion that does not trace back to a clause should be removed.
Percentiles beat thresholds
A raw threshold, such as a price to earnings ratio below fifteen, means different things in different industries and different years. Fifteen is expensive for a utility and cheap for a software company; it is cheap in a bull market and ordinary in a bear one. A percentile rank asks instead where the company stands against the whole market today: a price to earnings ratio in the bottom quarter of all stocks is cheap whatever the absolute level, and it stays cheap in the same sense as the market moves.
FundSpec's screener accepts every criterion either way, as a raw value or as a market percentile, and recomputes the percentiles nightly. Use raw values when the number itself matters to you, a dividend yield above four percent because you need the income, and percentiles when you mean "among the best" or "among the worst".
Narrow the universe first
The first filters should be structural: sector, industry and size. A screen for cheap stocks that does not fix the sector will fill with banks, energy companies and shipping firms, which always look cheap on earnings for reasons specific to those industries. A screen that does not fix a size floor will fill with micro caps whose ratios are distorted by tiny denominators. Decide the universe, then apply the idea inside it.
Fewer criteria, then sort
The temptation is to add criteria until the list is short. The better practice is to use three or four that capture the idea, accept a longer list, and sort it. Sorting by the criterion you care most about puts the best matches at the top, and it shows you the shape of the distribution rather than an arbitrary cut. If the sorted list is too long, tighten the criterion you sorted on, not a different one.
Check what the screen actually found
A screen returns what you asked for, which is not always what you meant. Open the top results and read them. A screen for high return on equity finds companies with tiny equity as often as companies with high returns. A screen for low price to book finds companies whose book value is about to be written down. A screen for high dividend yield finds companies whose stock has collapsed. Each of these has a fix, a floor on equity, a check on recent losses, a filter on price momentum, but you only learn the fix by looking at the false positives.
Keep it and rerun it
A good screen is an asset. The market changes, and a screen rerun each month shows you which names have entered and left, which is itself information: a stock that newly qualifies for a value screen has either fallen or improved, and either one is worth a look.
How FundSpec shows it
The Stock Screener filters US stocks by sector, industry, market capitalisation and FundSpec rating, then by any tracked fundamental, margins, growth, returns, leverage, valuation ratios and more, as a raw value or a market percentile. Results open straight into the full stock page, and any set of results can be sent to the compare view to line them up side by side.
Put this to work in the FundSpec web app. The same screen is in the iOS and Android apps.
Open Stock Screener