A screener narrows a large universe; it does not replace company research.
Start with a question
Decide whether you want growth, quality, value, dividends, low leverage or another measurable characteristic.
Useful filters
Market cap, P/E, ROE, ROCE, debt-to-equity, free cash flow, revenue growth and profit growth are common starting points.
Avoid overfitting
Too many filters can exclude good businesses and create false precision. Use screening as stage one.
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A screener is a discovery tool, not a thesis
Screeners are excellent for reducing a large universe to a manageable shortlist. The mistake is treating filter results as conclusions.
Build screens around a question
Examples: “Which companies combine improving ROCE and profit growth?” or “Which businesses have low net debt and durable cash generation?” A question-led screen is more useful than dozens of unrelated filters.
Use staged filtering
- Start broad enough to avoid accidentally excluding good businesses.
- Apply quality and financial-health filters.
- Add valuation only after understanding the universe.
- Manually research the resulting shortlist.
Why screens miss companies
Accounting definitions, sector differences, temporary cycles and missing data can all cause a good company to fail a numerical filter.
Screening checklist
- ☐ Question defined
- ☐ Universe defined
- ☐ Filters economically justified
- ☐ Sector differences considered
- ☐ Shortlist manually researched