Stock screeners are named among the most favourite stock analysis tools of investors. They not only save time and efforts but also enable the investors to make informed decisions regarding their investments. But what exactly stock screeners are and how they work? In this article, we will answer all of your questions regarding stock screeners. Keep reading!
What is a stock screener?
In simple words, a stock screener is a tool, application or software that provides the users with a list of stocks that matches a certain predefined criteria, after scanning through the stock market database. You can set your preferences and apply filters to get the most suitable stocks to invest in.
How does a stock screener work?
Stock screeners work in a very simple way. They come with some predefined metrics such as market capitalization, close value, P/E ratio, trading volume, price volume, etc. The user sets the screener depending on its trading strategy and personal likes and when he makes a search, all the stocks matching his preferences are displayed on a single screen. It is as simple as that!
How to use a stock screener?
Stock screeners are very easy to use and this is the reason why they are recommended to beginners. You can easily use them like any other app or software on your mobile/laptop.
But before that, you need to learn and understand what the basic fundamental metrics mean and what is their significance in stock analysis. Below are the common metrics used in a technical stock screener in India :
Market capitalization or market cap is the total market value of a company based on its stocks. Most investors prefer investing in high-cap companies because they are more stable and safe. On the other hand, the small-cap companies are slightly volatile. But some aggressive investors still prefer investing in small-cap funds and stocks because they offer better returns, most of the time. In stock marketing, high risk translates to high returns and vice-versa.
Revenue is the total income generated by a company over a period of time. This is the net income before separating the expenses. Once expenses are deducted from revenue, it gives the profit.
PEG ratio is used to check whether or not the company, fund or stock is valued fairly. It is measured by dividing the P/E ratio (given in the stock screeners) by the total annual income per share growth.
A company is considered to be priced fairly when the PEG ratio is 1. If this ratio is less than 1, then the company is undervalued and if it’s more than 1, it is overvalued.
The dividend is the amount a company offers its shareholders, from its net profits. It represents that the company is performing well and expecting better growth in future. Investors should prefer companies that are offering some sort of positive dividend, even if it’s a small amount.
So, these are some of the fundamental metrics you should learn before performing stock analysis.
Now let’s look into a few other things that you should keep in mind while using a technical stock screener in India :
Select the right screener
There is a wide range of stock screeners out there, but not all of them are worth considering. You need to select the one that is easy to use, authentic and offers real-time data.
Use it along with your research
Always perform your research and analysis while using fundamental indicators on a technical stock screener. Although stock screeners offer filtered results based on your criteria, it’s your responsibility to cross check the company’s background, financial history and performance.
Stock screeners offer great help in doing stock analysis. They are very convenient and time-saving as well. Once you know how to use them correctly, they can help you in becoming a better investor.