A stock screener is a tool that filters thousands of stocks based on criteria you define, like price, market cap, or valuation metrics. To use one effectively, start by identifying your investment goals, then apply relevant filters to narrow the universe of stocks to a manageable list of candidates for further research. Most screeners let you save your criteria and refine them as you learn what works for your strategy.
Key Takeaways
- Stock screeners filter 8,000+ publicly traded U.S. stocks down to a focused list based on your specific criteria
- Start with 3-5 basic filters rather than 20+ parameters to avoid eliminating good candidates prematurely
- Natural language screeners let you describe what you're looking for in plain English instead of setting manual parameters
- Always treat screener results as research starting points, not buy recommendations—each stock requires individual analysis
- Save successful screening strategies and adjust them quarterly as market conditions and your goals evolve
Table of Contents
- What Is Stock Screening?
- Why Use a Stock Screener?
- Types of Stock Screeners
- How to Use a Stock Screener: Step-by-Step
- Common Screening Criteria Explained
- Popular Screening Strategies
- Common Mistakes to Avoid
- Frequently Asked Questions
- Conclusion
What Is Stock Screening?
Stock screening is the process of filtering the universe of publicly traded companies based on quantitative and qualitative criteria to identify potential investment candidates. With over 8,000 stocks trading on U.S. exchanges alone, screening helps investors narrow this massive field to a manageable number of companies worth researching in depth.
The concept originated in the 1980s when computerized databases made it possible to sort stocks by fundamental metrics. Before that, investors manually reviewed printed stock tables and annual reports. Today's screeners can process hundreds of data points in seconds, from basic metrics like price and volume to complex calculations like free cash flow yield or return on invested capital.
Stock Universe: The complete set of stocks available for screening, typically all companies trading on major exchanges. Most screeners cover NYSE, NASDAQ, and AMEX stocks, representing roughly 8,000-10,000 companies.
Stock screening doesn't replace fundamental analysis—it focuses it. Instead of researching hundreds of random companies, you identify a subset that matches your investment approach, then conduct thorough research on those specific candidates.
Why Use a Stock Screener?
Stock screeners save time by automating the initial filtering process that would otherwise take hours or days of manual research. An investor looking for dividend stocks with yields above 4% and payout ratios below 70% can find matching companies in under a minute rather than reviewing thousands of individual stock pages.
Beyond efficiency, screeners help remove emotional bias from stock discovery. When you browse financial news or social media, you're exposed to whatever stocks are currently trending or advertised. Screening lets you systematically find stocks based on objective criteria rather than hype or popularity.
Screeners also help investors learn which metrics matter most for different strategies. By experimenting with various filter combinations and tracking results over time, you develop a better understanding of what characteristics correlate with your investment goals.
Advantages of Stock Screening
- Reduces research time from hours to minutes for initial stock discovery
- Applies consistent criteria across thousands of companies simultaneously
- Uncovers lesser-known stocks that meet your criteria but lack media coverage
- Lets you test different investment strategies by adjusting filters
- Creates repeatable processes you can run monthly or quarterly
Limitations
- Only evaluates quantitative data, missing qualitative factors like management quality or competitive moats
- Relies on historical data that may not predict future performance
- Can exclude good investments if filters are too restrictive
- May surface value traps—cheap stocks that are cheap for good reason
- Doesn't account for recent news or events not yet reflected in financial metrics
Types of Stock Screeners
Stock screeners fall into three main categories based on how you interact with them: traditional filter-based screeners, preset strategy screeners, and natural language screeners. Each approach has different strengths depending on your experience level and screening needs.
Filter-Based Screeners
These traditional screeners present dozens or hundreds of criteria you can set manually. You select parameters like "P/E ratio between 10 and 20" or "market cap above $2 billion" through dropdown menus and input fields. Filter-based screeners offer maximum control but require knowledge of what each metric means and how to set appropriate thresholds.
Examples include Yahoo Finance's stock screener, Finviz, and most brokerage platform screeners. These work well when you know exactly what you're looking for and can translate your strategy into specific numerical ranges.
Preset Strategy Screeners
These screeners offer pre-built templates based on common investing strategies. You might select "Dividend Aristocrats" or "Small Cap Growth" and the screener applies a predetermined set of filters. This approach helps beginners learn what criteria define different strategies, though you typically can't customize the exact parameters.
Natural Language Screeners
The newest category lets you describe what you're looking for in plain English rather than setting technical parameters. You might type "large cap tech companies with strong revenue growth" and the screener interprets your intent and applies appropriate filters. Tools like Rallies.ai's Vibe Screener use this approach to make screening accessible without requiring deep knowledge of financial metrics.
Screening Criteria: The specific parameters or thresholds you set to filter stocks, such as "dividend yield above 3%" or "debt-to-equity ratio below 0.5." Each criterion narrows the result set.
How to Use a Stock Screener: Step-by-Step
Using a stock screener effectively involves more than just setting filters and reviewing results. The process requires preparation, strategic filter selection, and proper follow-up research to turn screening results into investment decisions.
Step 1: Define Your Investment Objective
Before opening a screener, clarify what you're trying to accomplish. Are you looking for dividend income, long-term growth, undervalued companies, or something else? Your objective determines which screening criteria matter most. A retiree seeking income focuses on different metrics than a young investor building long-term wealth.
Write down 2-3 specific characteristics you're seeking. For example: "Companies with consistent dividend growth, strong balance sheets, and reasonable valuations" or "Small-cap companies with accelerating revenue growth and improving profit margins."
Step 2: Choose 3-5 Primary Filters
Start with a small number of filters based on your objective. Using too many criteria initially often eliminates nearly all stocks, including potentially good candidates. You can always add filters to narrow results further, but you can't recover stocks eliminated by overly restrictive initial criteria.
For a dividend strategy, you might start with: dividend yield above 3%, payout ratio below 70%, and market cap above $2 billion. For a growth strategy: revenue growth above 15% annually, positive earnings, and P/E ratio below 40.
Step 3: Run the Screen and Review Result Count
Execute your screen and check how many stocks matched. Ideal result counts are 15-50 stocks for most investors. Fewer than 10 suggests overly restrictive criteria; more than 100 means you need additional filters to create a manageable research list.
If you get too many results, add one filter at a time and rerun the screen. If results are too few, relax your strictest requirement slightly. For example, if requiring dividend yield above 5% returns only 3 stocks, try 4% instead.
Step 4: Sort and Prioritize Results
Most screeners let you sort results by any column. Sort by different metrics to see which stocks rank highest on various measures. A stock appearing in the top 20% when sorted by multiple relevant metrics deserves closer attention than one ranking high on just one measure.
Create a shortlist of 5-10 stocks that look most promising based on your sorting. These become your research candidates for deeper analysis.
Step 5: Conduct Individual Stock Research
Screening identifies candidates; it doesn't complete your research. For each stock on your shortlist, review recent earnings reports, read about the company's business model, check recent news, and verify the screener data is current. Tools like AI-powered research assistants can help you quickly gather detailed information on specific companies.
Look for red flags the screener couldn't catch: deteriorating competitive position, regulatory issues, management changes, or concerning trends in the quarterly results. Many stocks pass screening criteria on trailing twelve-month data but face challenges not visible in aggregate metrics.
Step 6: Save Your Screen and Set a Review Schedule
Most screeners let you save screening criteria for future use. Save successful screens and run them monthly or quarterly to find new stocks meeting your criteria as market conditions change. What failed to pass your screen three months ago might qualify now, and vice versa.
Track which screening strategies produce the best results for your goals. Over time, you'll refine your criteria based on what actually worked versus what seemed good in theory.
Common Screening Criteria Explained
Understanding what each screening criterion measures helps you select appropriate filters for your strategy. Here are the most widely used screening metrics and what they reveal about companies.
Valuation Metrics
These metrics help identify whether a stock might be overpriced or underpriced relative to its earnings, assets, or sales.
Metric What It Measures Typical Range P/E Ratio Price per dollar of annual earnings 15-25 for market average P/B Ratio Price relative to book value per share 1-3 for most sectors P/S Ratio Price per dollar of annual revenue Varies widely by sector EV/EBITDA Enterprise value per dollar of operating earnings 10-15 for market average P/E Ratio: Price-to-earnings ratio divides stock price by annual earnings per share. A P/E of 20 means investors pay $20 for each $1 of annual profit. Lower ratios may indicate undervaluation, though they can also reflect poor growth prospects or business problems.
Growth Metrics
These criteria identify companies with expanding revenues, earnings, or other key measures. Growth screens typically look for year-over-year or multi-year compound growth rates above certain thresholds.
- Revenue Growth: Percentage increase in sales over time. Many growth screens require 15%+ annual growth.
- Earnings Growth: Change in net income or earnings per share. Often screened at 10%+ annually.
- Cash Flow Growth: Increase in operating or free cash flow, indicating genuine business expansion.
Profitability Metrics
These filters identify efficiently run businesses that convert revenue into profit effectively.
- Profit Margin: Net income as a percentage of revenue. 10%+ is considered healthy for many industries.
- Return on Equity (ROE): Net income divided by shareholder equity. Values above 15% indicate strong profitability.
- Return on Assets (ROA): Net income relative to total assets. Measures how efficiently a company uses its asset base.
Dividend Metrics
For income-focused investors, these criteria identify stocks with attractive dividend characteristics.
- Dividend Yield: Annual dividend per share divided by stock price. Yields of 3-6% are common targets.
- Payout Ratio: Percentage of earnings paid as dividends. Below 70% suggests sustainability.
- Dividend Growth Rate: Percentage increase in dividend per share over time. Consistent growth indicates management commitment.
Financial Health Metrics
These screens filter for balance sheet strength and financial stability.
- Debt-to-Equity Ratio: Total debt divided by shareholder equity. Lower values indicate less leverage and financial risk.
- Current Ratio: Current assets divided by current liabilities. Above 1.5 suggests good short-term liquidity.
- Interest Coverage: Operating income divided by interest expense. Higher values mean debt is more manageable.
Popular Screening Strategies
Different investment philosophies use different combinations of screening criteria. Here are several proven approaches investors use to find stocks matching specific strategies.
Value Stock Screening
Value screens look for stocks trading below their intrinsic worth based on fundamentals. A basic value screen might include: P/E ratio below sector median, P/B ratio below 3, positive earnings, and dividend yield above 2%. More stringent value screens add requirements like ROE above 10% to avoid value traps—stocks that are cheap because the business is deteriorating.
Benjamin Graham's classic criteria from "The Intelligent Investor" remain popular: P/E below 15, debt-to-equity below 0.5, current ratio above 2, and positive earnings in each of the past 10 years. Few stocks pass all these criteria simultaneously, but they illustrate the value investing philosophy of prioritizing financial strength and low valuation.
Growth Stock Screening
Growth screens identify companies expanding faster than average. Common criteria include: revenue growth above 15% annually for the past 3 years, earnings growth above 15%, profit margin above 10%, and positive free cash flow. Some growth screens also cap valuation metrics to avoid overpaying—for example, requiring PEG ratio (P/E divided by growth rate) below 2.
Aggressive growth screens might look for small-cap companies (market cap $300M-$2B) with revenue acceleration—each year growing faster than the previous year. This approach finds early-stage growth stories but involves higher risk.
Dividend Growth Screening
This strategy targets companies with track records of consistently raising dividends. A typical screen requires: 10+ consecutive years of dividend increases, current yield above 2%, payout ratio below 60%, and positive earnings growth. The combination of yield and dividend growth can produce strong total returns over time.
The "Dividend Aristocrats" are S&P 500 companies with 25+ consecutive years of dividend increases. This ultra-selective screen historically produces 30-65 stocks with exceptional financial stability.
Quality Stock Screening
Quality screens focus on business excellence regardless of valuation or growth rate. Common criteria include: ROE above 20%, profit margin above 15%, revenue growth above 10%, debt-to-equity below 0.3, and positive free cash flow. These screens identify well-run businesses with competitive advantages, though they often trade at premium valuations.
Momentum Screening
Momentum strategies find stocks with strong recent price performance, betting that trends continue. A momentum screen might require: 50-day moving average above 200-day moving average, 6-month price return above 20%, increasing trading volume, and price within 10% of 52-week high. Momentum screens require more active management since price trends eventually reverse.
Building Your First Screen: Checklist
- ☐ Identified your primary investment objective (income, growth, value, etc.)
- ☐ Selected 3-5 criteria that align with your objective
- ☐ Set realistic threshold ranges based on market norms for each metric
- ☐ Ran initial screen and evaluated result count (target: 15-50 stocks)
- ☐ Sorted results by multiple relevant metrics
- ☐ Created shortlist of 5-10 stocks for deeper research
- ☐ Saved screening criteria for future use
- ☐ Set calendar reminder to rerun screen monthly or quarterly
Common Mistakes to Avoid
Even experienced investors fall into predictable traps when using stock screeners. Recognizing these mistakes helps you use screening tools more effectively.
Using Too Many Filters Initially
New screener users often apply 15-20 filters simultaneously, then wonder why they get zero results. Each additional criterion eliminates more stocks. A company might score well on 18 of 20 metrics but get excluded because it narrowly misses two arbitrary thresholds. Start with 3-5 core criteria, then add filters only if results are too numerous.
Treating Screener Results as Buy Recommendations
Passing a screen means a stock deserves research, not that you should buy it immediately. Screeners use backward-looking data and can't evaluate qualitative factors like management competence, competitive threats, or industry disruption. Always conduct individual stock analysis before making investment decisions.
Ignoring Sector Context
A P/E of 30 might be expensive for a utility company but reasonable for a software company. Screening the entire market with identical criteria often produces results skewed toward certain sectors while missing opportunities in others. Consider running separate screens for different sectors with sector-appropriate thresholds, or compare stocks primarily to industry peers.
Setting Arbitrary Thresholds Without Rationale
Why require P/E below 15 specifically, rather than 14 or 18? Many investors choose screening thresholds randomly rather than based on research or strategy. Better approaches include using sector medians, historical averages, or thresholds proven effective in academic research. Your criteria should have logical justification.
Never Adjusting Saved Screens
Market conditions change. A screen optimized for low interest rate environments may need adjustment when rates rise. Companies that historically traded at certain valuations may trade differently as their business models mature. Review and refine your screening criteria quarterly based on changing market dynamics and what's actually working.
Focusing Only on Valuation or Only on Growth
Pure valuation screens without growth or quality filters often find value traps. Pure growth screens without valuation limits often surface expensive stocks vulnerable to sharp corrections. The most effective screens typically combine elements from multiple categories—reasonable valuation, acceptable growth, and solid financial health.
Forgetting About Liquidity
A stock might pass all your criteria but trade only 5,000 shares daily with wide bid-ask spreads. For most individual investors, adding a minimum average daily volume filter (perhaps $500,000-$1,000,000 in daily trading value) helps avoid illiquid stocks that are difficult to buy or sell at fair prices.
Frequently Asked Questions
1. How many stocks should my screener results show?
Aim for 15-50 stocks in your initial screening results. This range is large enough to provide meaningful choices but small enough to research individually. If you get fewer than 10 results, your criteria may be too restrictive and could be excluding good candidates. More than 100 results typically means you need additional filters to create a focused research list. Remember that screening is just the first step—you'll narrow this list further through individual company research.
2. Should I use free or paid stock screeners?
Free screeners like those from Yahoo Finance, Finviz (basic version), and most brokerages provide sufficient functionality for most individual investors. They typically offer 50-100 screening criteria including standard valuation, growth, and financial metrics. Paid screeners justify their cost if you need real-time data, advanced technical indicators, backtesting capabilities, or more frequent data updates. For beginners and most long-term investors, free screeners provide more than enough capability to find quality investment candidates.
3. How often should I run my stock screens?
Run your screens monthly or quarterly for most long-term strategies. More frequent screening rarely produces meaningfully different results since fundamental metrics update quarterly with earnings reports. Momentum-based strategies may benefit from weekly screening since they rely on price trends that change faster. Set a consistent schedule and stick to it rather than screening randomly. This disciplined approach helps you spot new opportunities as they emerge while avoiding the tendency to constantly tinker with working strategies.
4. Can I screen for stocks under $10 or penny stocks?
You can, but proceed cautiously. Stocks under $5 often face liquidity issues, higher volatility, and greater risk of manipulation or delisting. Many professional investors set minimum price filters of $5-$10 to avoid these issues. If you screen for low-priced stocks, add stringent filters for minimum market cap (perhaps $300M+), average daily volume (at least $1M in daily trading value), and exchange listing (NYSE or NASDAQ rather than OTC markets). Low share price alone doesn't indicate value—focus on valuation metrics like P/E and P/B instead.
5. What's the difference between fundamental and technical screening?
Fundamental screening filters stocks based on business metrics like earnings, revenue, debt, and profitability—information from financial statements and company operations. Technical screening uses price patterns, volume trends, moving averages, and momentum indicators derived from stock charts. Fundamental screens identify businesses meeting financial criteria; technical screens identify stocks with favorable price trends. Many investors combine both approaches, using fundamental screens to find quality companies, then applying technical filters to time entry points or confirm positive momentum.
6. Why do stocks that pass my screen sometimes perform poorly?
Screening uses historical data that may not reflect current reality or future prospects. A stock might show strong trailing twelve-month earnings growth, but management just warned that next quarter will disappoint. Screeners can't evaluate qualitative factors like competitive threats, management changes, regulatory issues, or industry disruption. This is why screening is just the first step—individual research helps you understand the story behind the numbers and identify whether positive historical metrics will continue.
7. Can I screen for specific events like upcoming earnings or recent insider buying?
Some advanced screeners offer event-based filters including earnings announcement dates, recent insider transactions, analyst rating changes, or dividend announcements. These filters help you find stocks with potential near-term catalysts. If your screener doesn't offer event filters, you can run your fundamental screen first, then check earnings calendars or insider trading databases separately for your shortlisted stocks. Combining fundamental criteria with upcoming events can help identify investment candidates with both solid business metrics and near-term reasons for price movement.
Conclusion
Learning how to use a stock screener effectively transforms your investment research process from overwhelming to systematic. By starting with clear objectives, applying 3-5 focused criteria, and treating results as research starting points rather than buy recommendations, you can efficiently identify investment candidates worth deeper analysis from thousands of available stocks.
Remember that screening is a skill that improves with practice. Your first screens may produce unsatisfying results or require multiple adjustments to get useful output. Track which screening strategies work for your goals, refine your criteria based on actual results, and run your successful screens regularly to find new opportunities. For more comprehensive guidance on stock discovery and analysis techniques, explore our complete guide to stock screening.
Want to skip the technical setup? Try the Vibe Screener to find stocks using natural language, or ask the AI Research Assistant specific questions about stocks that match your criteria.
References
- U.S. Securities and Exchange Commission. "Beginners' Guide to Asset Allocation, Diversification, and Rebalancing." sec.gov
- Graham, Benjamin. "The Intelligent Investor." HarperCollins, revised edition 2006.
- Dimensional Fund Advisors. "Historical Returns on Stocks, Bonds and Bills: 1928-2023." dimensional.com
- CFA Institute. "Equity Valuation: A Survey of Professional Practice." cfainstitute.org
- Financial Industry Regulatory Authority. "Stock Screening Tools." finra.org
Disclaimer: This article is for educational and informational purposes only. It does not constitute investment advice, financial advice, trading advice, or any other type of advice. Rallies.ai does not recommend that any security, portfolio of securities, transaction, or investment strategy is suitable for any specific person.
Risk Warning: All investments involve risk, including the possible loss of principal. Past performance does not guarantee future results. Before making any investment decision, you should consult with a qualified financial advisor and conduct your own research.
Written by: Gav Blaxberg
CEO of WOLF Financial | Co-Founder of Rallies.ai
