What is a Stock Screener?

Every e-Commerce platform has a filter that allows you to choose products based on your needs and criteria. The filters help you eliminate major chunks of products that do not fit right for you. Similarly, stock screeners are the filters of the stock market world. Thousands of companies have registered their stock on exchanges. Selecting the right stock to invest in among a wide array of stocks is troublesome and tedious. Stock screener eases this entire decision-making process.

A Stock Screener?

A stock screener is a tool used to differentiate plenty of securities based on defined criteria. It is used by traders, whether fundamental or technical and individual as well as professional investors. It helps them to find the best suitable securities, according to their investment goals. Some of the stock screeners are available for free on broking websites, whereas some need user subscriptions. Stock screeners, that require a subscription, offer advanced features to comfort the investors/traders.

Investors define some criteria on the screener based on personal requirements. It helps to filter out the investment opportunities. More the criterions selected, further narrowed are the potential securities available for the respective investor. Depending on those criteria, the screener notifies users when their defined criteria are met.

The criteria selected differ among each trader. Fundamental investors or traders may choose Price-Earnings Ratio (PE Ratio), Market Capitalization, Earning Per Share, Dividend, Dividend yield, Return on Investment, average volume, 52-week price change percentage, and so on.

Traders preferring technical analysis may filter out the investment opportunity based on technical indicators such as Relative Strength Index, Moving Average, Moving Average Convergence Divergence, Average Directional Index, and more.

Uses of Stock Screener

The most common use of a stock screener is to present the list of best-suited stocks according to the user's requirements and preferences. Also, assessing all the stocks is a tedious and lengthy process. Stock screener significantly reduces the time required to evaluate the stocks. It also regularly updates current information which is vital to make investment decisions.

Some of the screeners help to save the screen which users can look at for future reference. The stock screener will display the stocks which meet the user requirements irrespective of their popularity. Investors may find an investment opportunity which he/she was not aware of earlier.

The screener presents the stocks comparing the company's prospectus that matches the user's criteria. This will prevent the traders/investors from making illogical or emotional decisions. It makes sure that the users are not preferring any stock only because they are using their product or they are popular.

Example of Stock Screener

Consider that you are a fundamental investor. You use one of the stock screeners to choose among a variety of stocks. You want to invest only in Indian stocks and select the country. You have some sectors in mind where you want to invest which are the auto sector, banking sector, textile sector, and hospitality. So, you select those sectors on the screener. Now, you have a price target of Rs. 30/share or below. So, you select stocks for or below Rs .30 in those sectors. Additionally, you select the stocks that offer a dividend yield of 5% or above.

Finally, the filtered or screened list of stocks that would be displayed on your screen will be from your favourite sectors that are priced at Rs. 30 or below and offer a dividend yield of 5% or above.

Putting it together, stock screeners aid in finding the best investment opportunity depending upon the criteria of your choice. The main advantage is that it can be done in a flash. The stock screener is not limited to a specific type of investor; everyone can use it.