Fundamental Stock Screener

If you’re interested in investing in a stock for the long term, you need to pay close attention to its fundamental factors. The stock’s fundamental strength and future growth potential play a huge role in its long-term performance. By prioritising fundamental analysis, you can effectively steer clear of market noise and short-term fluctuations, which is essential for long-term investing.

A fundamental stock screener can help you identify stocks with good financial metrics and a long performance track record. The tool makes fundamental analysis of stocks much easier and helps you make well-informed investment decisions much quicker than if you were to manually analyse their financial performance.

A fundamental stock screener is a powerful tool that enables you to shortlist stocks based on key financial metrics like revenue, net profit, Price-to-Earnings (PE) ratio, dividend yield, operating cash flow, debt-to-equity ratio, Return on Equity (ROE) and Return on Capital Employed (ROCE), among others.

A fundamental screener sifts through thousands of stocks, evaluating and filtering them to identify the ones that match your chosen criteria. Once the list of stocks matching the predefined criteria is generated, the tool even allows you to compare multiple stocks side-by-side, helping you choose promising and fundamentally strong stocks with good wealth creation potential.

A screener for fundamental analysis like the one offered by Research 360 by Motilal Oswal enables you to filter stocks based on financial and other fundamental metrics. Some of the key metrics that the tool indicates are as follows.

Step 1: Select the Criteria

For any fundamental stock screener in India to provide accurate results, you need to first select the right criteria. Most screeners have predefined criteria that you can choose such as PE ratio, dividend yield, revenue and net profit.

Step 2: Review the Results

Once you’ve chosen your preferred criteria, the stock screener will instantly produce a list of companies that match them. Review the results thoroughly and compare the stocks with one another. This should help you identify companies that have performed consistently.

Step 3: Analyse Individually

Upon reviewing the results and shortlisting stocks even further, you need to set out to analyse each company individually. To get more context and insights, make sure to also look at other key fundamental and financial metrics.

Step 4: Use Your Findings

Once all of the stocks in the final list have been reviewed and analysed individually, you should ideally get clarity on which stock you need to invest in. If multiple stocks match your criteria and preferences, consider allocating your capital across these companies.

A screener for fundamental analysis like the one offered by Research 360 by Motilal Oswal enables you to filter stocks based on financial and other fundamental metrics. Some of the key metrics that the tool indicates are as follows.

Company Shareholding

A company’s shareholding pattern can provide you with insights into how the stock is likely to perform in the future. For instance, if the promoters, foreign institutional investors or mutual funds are selling their stake in a company, it may indicate potential trouble within the company. In such cases, it is advisable to stay away from investing in the stock.

Promoter Pledge

Promoters of a company may sometimes pledge their shares as collateral to obtain loans. However, it is usually done as a last resort when the company has exhausted all other forms of financing. If a fundamental screener indicates an increase in the promoters’ pledge for a stock, it may be indicative of financial troubles. Meanwhile, a decrease in the pledge may be a sign of a positive financial situation.

Return On Equity (ROE)

Return on Equity is a financial metric that indicates just how efficient a company is at generating profits using its shareholders’ funds. A high ROE is often preferred by investors since it suggests that the company is highly efficient at generating profits with the funds invested by its shareholders. Stocks with high ROE or a consistently increasing ROE should often be preferred.

Return On Capital Employed (ROCE)

Another major metric that a screener for fundamental analysis indicates is the Return on Capital Employed. It is a financial metric that indicates just how efficient a company is at generating profits using both debt and equity capital. A high ROCE is often preferred since it suggests that the company is highly efficient at generating profits with the capital available to it. Stocks with a high ROCE or a consistently increasing ROCE may be good long-term investment options.

Revenue

Revenue is the income generated by a company during a specific period from its primary operations. It represents the money earned before deducting expenses and taxes. Investors often prefer companies with a high revenue. That said, merely having a high revenue may not always be enough. The revenues should either be steady or increase with every quarter or year.

Net Profit

Net profit, also known as profit after tax or PAT, is the amount of money a company retains after deducting all possible expenses, depreciation, interest payments and taxes from its total revenue. The net profit is the earnings that belong to shareholders and provides you with a clearer picture of a company’s true financial state.

Earnings Per Share

Earnings Per Share or EPS is a financial metric that indicates the amount of profit belonging to each share of the company. It is arrived at by dividing the net income of the company by the total number of outstanding shares. The higher the EPS, the better the stock is for long-term investment purposes.

Debt Levels

Fundamental stock screeners also indicate the debt levels of a company. A company with high debt compared to its equity is said to be highly leveraged and may not be ideal for long-term investments. The high debt levels increase the interest payments and have the potential to bring down the profits.

Cash Flow From Operations

Cash flow from operations is another crucial financial metric that most fundamental stock screeners in India indicate. It provides insights into a company’s ability to generate cash from its daily operations. A company with a high inflow of cash from operations is viewed favourably compared to a company with low cash flows.

Price-to-Earnings Ratio

Price-to-Earnings (PE) Ratio is a metric that indicates just how much investors need to pay for each rupee of profit generated by the company. It is calculated by dividing the current market price of a stock by its EPS. A stock with a very high PE ratio is often considered to be overvalued and expensive, whereas a low PE ratio may indicate that the stock is undervalued.

Research 360 by Motilal Oswal, a comprehensive stock screener in India, offers single and multi-query fundamental screeners to help you identify financially strong companies. Here are some examples.

Consistently Increasing Revenue and Net Profit Screeners

These fundamental screeners provide you with a list of companies whose revenue and net profit have been consistently increasing quarter-over-quarter (QoQ) and year-over-year (YoY).

Promoters with Zero Pledge Screener

This screener displays the list of companies where the promoters have not pledged any of their shares as collateral to obtain loans.

Positive Turnaround Screener

The positive turnaround fundamental screener shows you a list of stocks that have made profits in the current year after recording a loss in the previous year.

Debt-Free Companies Screener

This stock screener gives you a list of companies that have not taken on any debt and are fully funded through equity and their own reserves.

High and Low Leverage Screeners

These fundamental screeners display stocks with high debt levels compared to equity and stocks with low debt levels compared to their equity.

Price to Earnings Ratio Screeners

Price to Earnings Ratio screeners display stocks with very high, high, moderate and low PE ratios.

High Dividend Yield Screener

This screener for fundamental analysis displays stocks that have high dividend yields. A company that distributes a major portion of its profits to its shareholders will have high yields.