Things You'll Need:
- Internet
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Step 1
Find a stock screener online, by typing stock screener into your search engine. Any of the top 4 in Google's results (Yahoo, MSN, Morningstar, or Google) should be adequate. However, if you looking for a specific metric that is not in one, try the others. I have found Morningstar to have the most comprehensive screener.
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Step 2
Decide the criteria that you would like to use to reduce the list. Depending on your objectives, there is an endless combination that will reduce your list to a smaller, more manageable list.
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Step 3
Consider some of the most commonly used choices: Industry (what industry the company works in, ie McDonalds would be Consumer Goods), Market Capitalization (a measure of the company's stock valuation, ie # of shares outstanding x share price), price/earnings (P/E) ratio (this is a company's share price divided by the company's earnings per share, some investor's enter a specific threshold based on the company's growth prospects, or a P/E lower than the industry average), Dividend Yield (this is the % of the share price paid out in quarterly dividends), and Revenue, Return on Equity, and Earnings Growth (Revenue refers to company's overall income and Earnings refers to the company's profits).
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Step 4
Once, you have the list down to 25 or fewer, you should begin the due diligence process. This would involve learning more about the company, verifying the data is based on sustainable results (ie if a company sold off an asset, the data may show a higher profit than it will be able to achieve in future years), and finding the companies that align with your goals and objectives.
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Step 5
For example, in Morningstar, I entered 3-year revenue growth >= 20%, Return on Equity >= 15%, 5-year forcasted earnings >= 15%, Trailing P/E <= 20, and Dividend Yield >= 1.0%. This produced 34 results. If desired, I could increase the criteria for any of the elements above, and attempt to decrease the list even further.
