Stock Screening Guide: Building Your Watchlist for Analysis

Recommended value ranges: How to find the best stocks to analyze using a stock screener

In this section, we’ll discuss the potential values that you can use to filter and find some of the best stocks to analyze. Please bear in mind that these are just some of the many values that can be used to filter stocks. You can use whatever values you see fit based on your investment strategy and goals.

Keep in mind that the more filters you use and the higher or lower the values you set, the fewer stocks will meet the criteria.

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Main Filters and Value Ranges:​

If you are already familiar with the terms, feel free to skip and just read the green paragraphs to learn about the recommended value ranges and save some time.

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Exchange 

A marketplace where securities, commodities, derivatives, and other financial instruments are traded. The main US exchanges are the New York Stock Exchange (NYSE), the Nasdaq and the American Stock Exchange (AMEX).

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At this time, WhizWays is only capable of analyzing stocks that are traded within the US market.

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Index

A statistical measure of the changes in a portfolio of stocks representing a portion of the overall market. It is used as a benchmark to evaluate the performance of different investments. Some of the most popular indexes are the S&P 500, the Dow Jones Industrial Average (DJIA) and the Nasdaq Composite.

Use this filter to see only stocks associated with a specific index. However, keep in mind that stocks could be added or removed from the index periodically based on their performance.

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Sector & Industry

A group of companies that have similar business activities, products or services. For example, the energy sector consists of companies that produce and distribute oil, gas, coal and renewable energy sources. Sectors are often used to classify stocks and compare individual stock performance to the sector benchmark. The industry is a more specific group of companies that operate in the same or related fields within a sector.

Use this filter to see only stocks that are associated with a certain sector or industry.

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​Country

Used to compare the economic and financial performance of different regions and markets. Some of the largest and most influential countries in the world are the United States, China, Japan, Germany and India.

Use this filter to find stocks of companies registered in a specific country. However, please note that WhizWays is currently only capable of analyzing stocks that are traded within the US market.

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Market Capitalization

Market capitalization (or simply market cap), is the total value of all the shares of a company or a group of companies. It is calculated by multiplying the number of shares by the current share price. Market cap is often used to measure the size and growth potential of a company or a market. For example, as of December 31, 2023, the market cap of Apple Inc. was $2.8 trillion, making it the largest company in the world by market cap.

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Use this filter to find only micro-cap, small-cap, mid-cap, large-cap, or mega-cap companies.

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P/E & Forward P/E

Price-to-Earnings ratio (P/E) is a valuation metric that compares the current share price of a company to its earnings-per-share (EPS). It is calculated by dividing the share price by the EPS. P/E is often used to measure how expensive or cheap a stock is relative to its earnings.

Let's take P/E of 15 as an example. Assuming, hypothetically, that you bought 100% of the company’s shares and the company doesn't grow in the future, it would take 15 years to recoup your initial investment through the company’s ongoing profits.

Forward P/E is similar to the P/E ratio, but it’s based on analysts’ expected earnings instead of past earnings.

The lower the P/E ratio, the better, because it means that you would pay less for each $1 of earnings. However, the P/E ratio should be compared to the industry and also to the company’s historical P/E ratio to understand if the stock is overvalued or undervalued. As a general rule of thumb, a P/E ratio of up to 25 is considered reasonable, but this may vary depending on the industry, the company’s growth prospects, and the overall market conditions.

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Rule of Thumb

• Below 15 - Typically indicates undervaluation relative to current and estimated future earnings per share. Suggests negative sentiment that may limit the upside.

• 15 to 25 - Signals fair or reasonable valuation given recent and expected profit levels. Implies accurate market assessment.

• Over 25 - Indicates investors expect strong earnings growth ahead. Prices in optimistic assumptions that escalate downside risk.

• Above 35 - Very expensive valuation with exceptional growth assumptions baked in. Raises the likelihood of volatility if estimates are not met.

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PEG

Price-to-earnings-to-growth ratio (PEG) is a valuation metric that compares the P/E ratio of a company to its expected earnings growth rate. It is calculated by dividing the P/E ratio by the annual EPS (earnings-per-share) growth rate. PEG is often used to measure how reasonable or unreasonable a stock’s valuation is relative to its growth potential.

A PEG ratio lower than 1.0 suggests that a company is relatively undervalued. However, it is important to compare the PEG ratio of a company to the rest of the industry to get a better understanding of its value.

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Rule of Thumb

• Below 1.0 - Generally indicates undervaluation, with earnings expansion potential not fully reflected in the share price. Suggests pessimism that limits future growth.

• 1.0 to 2.0 - Implies future earnings growth prospects are accurately priced into the stock. Signals a reasonable balance of expected growth and valuation.

• Over 2.0 - Tends to indicate overvaluation, with investors bidding up shares aggressively compared to forecast earnings expansion. Escalates risk of unmet expectations.

• Above 3.0 - Very elevated ratio showing price run far ahead of projected growth. High likelihood of volatile pullbacks if growth slows.

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P/S

Price-to-sales ratio (P/S) is a valuation metric that compares the current stock price of a company to its revenue per share. It is calculated by dividing the share price by the revenue per share. P/S is often used to measure how expensive or cheap a stock is relative to its sales.

A lower P/S ratio indicates a more attractive investment. However, it’s important to compare a company’s P/S ratio to that of the rest of the industry to gain a better understanding of its value.

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Rule of Thumb

• Below 1.0 - Indicates potential undervaluation, with a market cap small relative to total sales. Suggests business struggles or pessimistic investor perceptions.

• 1.0 to 3.0 - Values company reasonably compared to revenue scale. Signals accurate assessment of current operations.

• Above 3.0 - Implies expected high growth, with investors focused on future potential over current results. Increases speculative risk.
  Above 5.0 - Very elevated ratio requiring exceptional expansion of sales to justify. More volatility and performance uncertainty.

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P/B

Price-to-book ratio (P/B) is a valuation metric that compares the current share price of a company to its book value per share. It is calculated by dividing the share price by the book value per share. Book value is the net worth of a company, calculated by subtracting its total liabilities from its total assets. P/B is often used to measure how undervalued or overvalued a stock is relative to its assets.

A company with a lower P/B ratio may represent a more appealing investment opportunity. However, to properly assess a company's valuation, it is vital to compare a company's P/B ratio to the industry to determine if its shares are relatively undervalued or overvalued.

Rule of Thumb

• Below 1.0 - Generally indicates undervaluation, with market capitalization below net assets or book value. Suggests issues with business fundamentals or investor pessimism.

• 1.0 to 3.0 - Values company assets reasonably relative to share price. Implies accurate valuation of current operations.

• Above 3.0 - Signals investors expect strong future growth potential, justifying a premium to book value. Outsized expectations increase the risk of overpayment.

• Above 5.0 - Very high ratio requiring exceptional growth prospects to justify. More volatility and performance regression risk.

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P/FCF

Price / Free-Cash-Flow (P/FCF) is a valuation metric that compares the current share price of a company to its free cash flow per share. It is calculated by dividing the share price by the free cash flow per share. Free cash flow is the cash generated by a company after deducting its capital expenditures, such as investments in property, plant and equipment. P/FCF is often used to measure how expensive or cheap a stock is relative to its cash flow.

A lower P/FCF ratio may indicate that a company is undervalued and could represent a more attractive investment opportunity. However, it’s important to compare a company’s P/FCF ratio with that of the industry to determine if its shares are relatively undervalued or overvalued.

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Rule of Thumb

• Below 10 - Generally considered an attractive or cheap valuation. Indicates the company generates ample free cash flow compared to its stock price.

• 10 to 15 - Considered a moderate or fair valuation. Still represents solid cash flow generation ability.

• Above 15 - Indicates the company's free cash flow does not adequately support the current stock price. Could signal overvaluation or low/declining cash flows.

• Above 30 - Generally seen as a very expensive valuation requiring high, consistent growth in FCF to justify.

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EPS Growth (Past & Next 5 Years)

EPS growth for the past 5 years is a measure of how much, on average, a company’s historical earnings per share have increased or decreased over the past five years, while EPS growth for the next 5 years is an analyst-forecasted measure of how much a company’s earnings per share are expected to increase or decrease over the next five years. EPS growth for the next 5 years is often used to measure the future profitability and potential of a company or a market. 

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Rule of Thumb

• Below 5% annually - Earnings expansion that may concern investors on prospects to drive value. Implies challenges in profitably growing business.

• 5% -15% annually - Steady EPS increase demonstrates ability to reasonably translate revenue into bottom-line gains.

• Over 15% annually - Robust earnings growth signals potential to deliver significant shareholder value via profits. But attracts competition long-term.

• Above 25% annually - Extremely rapid growth in EPS. Tends to regress over time as business scale increases.

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Sales Growth (Past 5 Years)

Sales Growth is a measure of how much a company’s revenue has increased or decreased over the past five years, on average. Sales growth is often used to measure the historical growth and performance of a company or a market.

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Rule of Thumb​

• Below 5% annually - revenue expansion implies struggles to profitably expand market share or penetrate new segments. Concerning for future prospects.

• 5% -15% annually - Steady top-line increases demonstrate an ability to reasonably grow business scale over time.

• Over 15% annually - A robust pace of sales growth indicates success in winning business and disrupting markets. But difficult to sustain long-term and attracts competition.
  Above 25% annually - Extremely rapid growth in sales performance. Tends to regress toward industry averages as businesses and markets mature over time.

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Dividend Yield

Dividend yield is a measure of how much a company pays out in dividends to its shareholders relative to its share price. It is calculated by dividing the annual dividend per share by the current share price. The dividend yield is often used to measure the income and return potential of a stock. 

Comparing dividend yield to historical averages, industry peers and market benchmarks provides useful context. The higher the yield, the more emphasis the company places on income over growth.

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Rule of Thumb​

• 0% - Indicates the company does not currently pay dividends and focuses on reinvesting profits for growth. This is common, especially for high-growth companies or those in earlier stages of development.

• Below 2% - Indicates limited current income generation or focus on growth investments over dividends.

• 2%-4% - Reasonable yield that offers some current income along with moderate growth prospects. Should be compared to the market average.

• Over 4% - Represents substantial income generation, suggesting stock may have limited upside in favor of stability.

• Above 6% - An exceptionally high yield, implying the market expects dividend cuts or very slow growth ahead.

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Return On Assets

Return on assets (ROA) is a measure of how efficiently a company uses its assets to generate earnings. It is calculated by dividing the net income by the average total assets. ROA is often used to measure the profitability and performance of a company or a market. Comparing a company's ROA to past trends, competitor ranges and industry benchmarks provides a useful perspective on management's proficiency in generating profits from available assets.

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Rule of Thumb​

• Below 5% - Signals potential inadequate utilization of company assets to generate profits.

• 5%-15% - Reasonable return demonstrating assets are being suitably leveraged to produce operating income.

• Over 15% - Strong ROA indicating robust earnings generation from effective asset employment. But very high returns tend to regress over the long term.

• Above 25% - Extremely elevated ROA achieved through proprietary assets or business model. Difficult to perpetuate and often attracts competition.

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Return On Equity

Return on equity (ROE) is a vital financial ratio that assesses a company's efficiency at generating profits from shareholders' equity. By dividing net income by average shareholder equity, ROE quantifies how well management utilizes the money entrusted to it for profits. Comparing ROE trends and averages against the industry ultimately signals the skill level of leadership in perpetually delivering value to the business.

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Rule of Thumb​​

• Below 10% - Signals potential struggles to drive net income from existing shareholder equity. Implies suboptimal capital allocation or execution.

• 10%-20% - Reasonable return range suggesting equity capital is being appropriately utilized to drive bottom-line performance.

• Above 20% - Strong ROE indicating robust earnings generation given current shareholder investment level. But extremely high returns tend to mean-revert.

• Above 30% - Very elevated ROE signaling potential overearning that may prove challenging to sustain long-term without regression toward averages.

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Current Ratio

Current ratio is a liquidity ratio that measures a company’s ability to pay its short-term debts using its current assets. It is calculated by dividing the current assets by the current liabilities. Current ratio is often used to measure the financial health and stability of a company or a market.

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Rule of Thumb​​​

• Below 1.0 - Indicates potential issues with short-term liquidity. The company might struggle to cover near-term obligations using available working capital.

• 1.0 to 1.5 - Reasonable level that provides adequate coverage of near-term cash needs from reserves.

• Above 1.5 - Strong short-term liquidity allowing flexibility to address obligations and opportunities.

• Above 3.0 - may signal excess cash not being utilized efficiently.

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Quick Ratio

Quick ratio is a liquidity ratio that measures a company’s ability to pay its short-term debts using its quick assets. Quick assets are current assets that can be easily converted into cash, such as cash, marketable securities and accounts receivable. Quick ratio is calculated by dividing the quick assets by the current liabilities. Quick ratio is often used to measure the financial health and stability of a company or a market.

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Rule of Thumb

• Below 1.0 - Indicates potential issues meeting short-term obligations with most liquid assets. Raises concerns on flexibility if cash needs arise.

• 1.0 to 1.5 - Reasonable level of highly liquid assets to cover near-term cash demands. Provides adequate flexibility.

• Above 1.5 - Strong position for addressing immediate spending needs if they were to emerge. But may signal excess liquidity not utilized proactively.

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Debt / Equity

Debt / Equity (D/E) is a leverage ratio that measures a company’s total debt relative to its total equity. It is calculated by dividing the total liabilities by the total equity. Debt-to-equity ratio is often used to measure the financial risk and stability of a company or a market.

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Rule of Thumb​

• Below 1.0 - Company utilizes relatively low debt levels compared to shareholder equity. Signals more conservative capital structure with focus on balance sheet safety.

• 1.0 to 2.0 - Reasonable amount of financial leverage is employed to seek higher returns on shareholder equity.

• Above 2.0 - Relatively aggressive debt levels used to boost equity returns. Although riskier, leverage can lead to stronger growth if managed prudently.

• Above 3.0 - Very elevated debt burden and financial risk. While potentially beneficial economically in the short-term, such leverage is unsustainable long-term in most cases.

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Net Profit Margin

Net profit margin is a profitability ratio that measures a company’s net income relative to its revenue. It is calculated by dividing the net income by the revenue. Net profit margin is often used to measure the efficiency and profitability of a company or a market.

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Rule of Thumb​​

• Below 5% - Indicates a relatively small portion of revenues are translating into bottom-line profits. May signal high costs, intense competition, or poor pricing power.

• 5%-15% - Reasonable amount of net income generation relative to revenue. Aligns with average market margins.

• Above 15% - Demonstrates effective cost management and excellent conversion of sales into profits. However, very high margins tend to decline over time.

• Above 25% - Extremely elevated profitability achieved through proprietary products, strong brands, or pricing power. Difficult to perpetuate long-term without regression towards the mean.

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Analyst Recommendation

Analyst recommendation is a rating system that measures the consensus opinion of financial analysts regarding a particular stock or market. It is often used to provide guidance to investors on whether to buy, hold or sell a stock. Analyst recommendation is based on a variety of factors, such as financial performance, market trends, industry outlook and company news.

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Rating Scale:

• 5 = Strong Buy

• 4 = Buy

• 3 = Hold

• 2 = Sell

• 1 = Strong Sell

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Performance

Performance, or stock price performance, is a measure of how well a stock has performed over a certain period of time. It is typically calculated by comparing the current stock price to the price at the beginning of the period and then expressing the difference as a percentage. For example, if a stock was trading at $100 at the beginning of the year and is now trading at $120, its stock price performance would be 20%. Stock price performance is often used to evaluate the profitability and potential of a stock, as well as to compare the returns and risks of different investments.

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Rule of Thumb (Past 1-3 Years)​​​

• Negative returns - Lagging broader indices indicates issues with investment thesis and/or execution.

• Returns roughly in line with benchmarks - Suggests accurate market assessment of prospects balanced with risks.

• Material outperformance versus indices - Signals a proven winning strategy and effective execution driving value creation.

• Multiplying investment 2x-3x or more - Exceptional value creation but raises expectations going forward, escalating downside risk.

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Simple Moving Average (50-Day / 200-Day)

Simple moving average (SMA) is a technical indicator that measures the average price of a security over a certain period of trading days, usually 50 or 200. It is often used to identify trends and support/resistance levels in the market.

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Use this filter to find stocks that are trading by a certain percentage above or below its simple moving average.

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Average Volume

Average volume is a metric that measures the average number of shares traded in a stock over a specified period of time. For example, if a stock has an average volume of 1 million shares per day, it means that on average, 1 million shares of the stock are traded every day.

It is often used to evaluate the liquidity and volatility of a stock, as well as to identify trends and support/resistance levels in the market.

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Rule of Thumb​

• Below 50,000 shares per day - Signifies limited investor interest and potential liquidity challenges.

• 50,000 to 500,000 shares per day - Decent market participation for smaller companies but still relatively thin trading activity compared to larger companies.

• 500,000 to 2 million shares per day - Reasonable level of trading activity. Sufficient market depth for most institutional investors.

• Over 2 million shares per day - Robust trading activity signals strong investor interest and facilitates easier entries/exits. But also raises expectations.

• Over 10 million shares per day - Elite-level volume creates adequate liquidity for the largest institutional holders.

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Stock Price

Stock price, or simply price, refers to the current price that a share of stock is trading for on the market. Every publicly traded company, when its shares are issued, is given a price – an assignment of their value that ideally reflects the value of the company itself. The price of a stock will go up and down in relation to a number of different factors.

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Rule of Thumb​​

• Below $5 per share - Usually smaller, speculative companies. Extremely high-risk profile in many cases.

• $5 to $15 per share - Often indicative of companies in earlier growth stages and higher volatility.

• $15 to $50 per share - Encompasses a wide range, but signals established operating history.

• Over $50 per share - Tend to be larger, blue chip companies. Implies a longer track record and lower risk attributes in many instances.

• Over $100 per share - Prestige pricing indicative of dominant franchises.