5 Tips For Screening Stocks In The Market

If you want to invest in stocks, it isn't an easy task. The challenging part is looking for criteria that you want to consider in a company. However, you need to find a dependable company that you can purchase at a discounted price. And to find such a company, you need a stock screener. 

Fortunately, most online brokers have stock screener. Other places to find a stock screener is at Money.com or Yahoo! Finance. Remember, the ratio or number of stocks may seem reasonable, but first, understand why it looks good. 

Here are tips for screening stocks: 

1. Earnings and Sales Growth

Investors like the high sales growth of a company. And such a company will get more consideration after it has high earnings growth. 

You can, therefore, screen a company by looking at its earnings and sales growth. Some of these companies in Canada with high sales growth include Canada Goose Holdings.  From 2018 to 2020, this company was expecting to double its revenues, which leads to earnings per share. 

1. New Highs

It would be best to see when a stock hits a new high. That's when most investors would like to sell their stocks to make profits, although it may be the best time to buy. 

In other words, a new high only means one thing: the other investors love the specific stock. However, this will not guarantee your success but can provide you with a reference for more research. 

1. Return On Equity (ROE)

Most investors will view a return on equity as a crucial factor when looking for a company to invest in its stocks. 

Indeed, the amount of money that a company will make through equity capital can be a significant financial indicator. Constellation Software, for example, has an ROE of 51%, and for a long time, it hasn't had a return on equity of less than 20%. Therefore, ROE can be a great way to identify a company.  

1. Low Debt

Debt is something that drags companies' growth and performance behind. Grown companies can efficiently operate without adding debt to their equation. 

If there is something worse in a growth company, it is having a debt because it will continue to slow down. In such conditions, those companies that have more cash are highly preferred, but with less debt. 

1. Bonus Screen

For a bonus screen, the investor should combine all the above criteria and make some adjustments. When screening, you should look for a company with low debt and its earnings and sales growth are over 20 percent. A return on equity should also be over 20 percent but with recent new highs. 

The Bottom Line 

The above information can help you to make an informed and better investment decision. Being able to use essential tools with available research makes you an excellent trader. Nevertheless, stock screeners aren't magic pills to use when selecting stocks. That's because nothing can replace the good old fashioned research. Fortunately, you have screens to help you with a good start.

Image Source: Unsplash