A good way to do fundamental analysis of stocks is to use stock screening. Until now there were paid databases that had screener functionality. A great service that I tried recently and was impressed with is Screener.in.
The folks at Screener.in have created a good product. I gave it a spin and I was impressed with the clean interface and user experience. Though it is not as powerful as paid services please bear in mind that they are providing it as a free website. I am not sure what their monetization plans are but until its free its a great resource for retail investors!
Try the screener at www.screener.in.
Some filters for fundamental analysis of stocks
Some of the filters I use for stock screening are given below.
- Return on equity > 20%
- Debt to equity < 0.5, with a strong preference for zero debt companies
- Net profit growth better than sales growth over the last 5 years which shows margin improvement
- Check whether EPS growth is consistently lesser than net profit growth because of equity dilution which is not good for shareholders.
- Low working capital requirements
- Cash as percentage of market capitalization to look at cash bargains
- Operating cash flow – capital expenditure to get the free cash flow figures
- Market capitalization > Rs. 400 crore
Like I said when I wrote the article on checklist for stock investing, there are different styles of investing. We have individual strengths and weaknesses. The key is in understanding what you are good at!
You have to choose your parameters appropriately. Your checklist could differ from the one I shared. Similarly, these filters are what work for me. You can have your own filters for stock screening.
What kind of filters do you set when you are filtering through stocks to select good ones? I would love to hear about them. Use the comments box below and share your views.