Getting To Know Stock Screeners

Although there are some good free screeners out there, if you want the very latest and the very best technology you will likely have to break down and get a subscription to a screening service.

Example Screen on Yahoo

To demonstrate how screeners work, let's look at an example using Yahoo Finance's free screener. Let's say we are looking for a life insurance company that trades on the NYSE , has a P/E ratio under 25, has revenue growth of 10% over the last five years and has profit margins of at least 10%. Before the age of computers, searching for companies to meet these criteria would have been a massive undertaking - it could have taken days. With a screener, it's easy.

Here is what the screener looks like on Yahoo Finance:

After we enter these criteria into the screener, it gives us the companies that make it through each of the filters of our search. (Note that these figures were correct at the time of the search, but are likely to change continually as stock prices fluctuate and new financials are reported.)

Now that we have the results of the stock screen, we have two candidates that are worthy of further analysis - that is, if we are confident in our criteria and the values we choose for them. The companies that the screener gives us are only as valuable as the searching criteria we enter. Also, it's important to remember that the screen is not the analysis itself. The screen can't guarantee that the two companies that made all our criteria are the best buys, so we have to dig deeper to find out more.