Many individuals forgo investing in individual stocks because they simply don’t know where to begin. With over 10,000 stocks traded on U.S exchanges alone, it is not surprising. Some investors attempt to chase after the latest “fad” stock being touted on financial blogs or investment newsletters, only to find they have come late to the party.
However, individual investors have the tools at their disposal to quickly and effectively isolate promising investment candidates if they have the time and patience to devote to the endeavor. The tools are called stock screeners, and with them you can select various parameters to isolate stocks meeting your criteria. These parameters may be technical in nature, such as finding stocks trading above their 50-day moving averages and with relative strength index RSI values above 90. Alternatively, you can create filters based on fundamental criteria, such as book value per share that is less than two-thirds the stock price and an average return on invested capital value over the last five years of at least 20%.
AAII has its own fundamental stock screening and research database program—Stock Investor Pro. With this software, AAII analysts track more than 60 stock screening methodologies at the Stock Screens area of AAII.com (www.aaii.com/stockscreens). We also use the software to develop new screens, which we discuss from time to time here in Computerized Investing and in the AAII Journal.
Following a mechanical or quantitative approach to stock selection helps eliminate one of the Achilles’ heels of many investors—emotion. Adhering to a defined investing system increases your chances of making consistent investment decisions rooted in fact rather than emotion.
Along with identifying potential opportunities, most screening systems also furnish company and industry data to investigate companies in an organized, consistent manner.
This product comparison focuses on the top online stock screening tools for those primarily interested in “fundamental” investing. These are the tools we ourselves use in our own analysis, and represent what we consider to be the best picks in this arena. We single out those online screeners with the best blend of value, flexibility, breadth of coverage, and ease of use. The Editor’s Choice screeners also cater more to “do-it-yourself” investors versus those Web sites that merely provide lists of companies matching predefined criteria.
If your interests rest more in technical analysis, comparisons of our top-rated Web- and software-based technical analysis and charting services are available in the article archive of ComputerizedInvesting.com.
The comparison grid lists information about subscription costs (when applicable), service features, and basic database content for our Editor’s Choice selections. Table 1 details the financial statement elements—from the income statement, balance sheet, and cash flow statement—found with each service. Individual ratings and strengths and weaknesses of the top services are outlined in Table 2. Reviews of our Editor’s Choice selections among online screening services begin on page 28. For an expanded comparison grid of other noteworthy screeners, be sure to check out the online version of this article.
The vast majority of stock screening tools are Web-based. In general, there is a trade-off between these online services and their disk-based counterparts. For one, disk-based screeners tend to offer greater flexibility in terms of the number of available screening elements or data fields and the depth of their databases—the number of fiscal years and quarters covered and, oftentimes, the number of companies in the screening database. However, Web-based services, such as the ones covered in this comparison, will automatically update their data on a timelier basis than many screening software packages.
Before using a screening system—online or software—to mimic a given stock selection methodology, we strongly urge you to understand the approach you are considering, get comfortable with its risk level, and be aware of the time commitment required to adequately implement and monitor it.
Furthermore, it is important to feel comfortable using the screening tool itself before relying on it for your investment decisions. That also means understanding its screening capabilities and its underlying data elements.
The screening systems we have assembled here (and in the expanded comparison grid) vary in their emphases and capabilities. When comparing stock screening services, important factors for you to consider include:
Since our last comparison of online screening services in 2008, there has been a significant change in the landscape: MSN Money’s Deluxe Screener was discontinued. This was one of the top Windows-based online screeners, and it was also free. Microsoft claims that its goal was to make its service accessible across platforms—Windows and Mac. However, it left users with a stripped-down screening module that, in our opinion, is no longer worth using. In its place among our top picks, we have added the CNBC.com stock screener as the new top free online screener.
Stock screening dictates that the search process begin with a broad universe of companies. The top online screeners cover a wide range of companies, with all of our top picks providing a screening database with over 8,000 companies. If you are interested in smaller firms, you may want a screener that tracks NASDAQ Bulletin Board over-the-counter OTC stocks—those stocks that do not meet the requirements of an organized exchange.
Screening services also distinguish themselves with the depth of information they provide. Services in our extended online comparison grid, such as Investor’s Business Daily’s Investors.com and Validea.com, provide fewer “raw” data elements per company, instead relying on summary statistics such as ratings and ranking when providing background data on individual companies. Our Editor’s Choice selections rank among the best in terms of offering summary statistics along with the raw data behind those numbers.
When considering a screening service, it is best to look beyond the number of variables they offer and consider which statistics they provide. Investors.com, ValueLine, and Morningstar.com (an Editor’s Choice selection) have proprietary ratings for company growth, profitability, financial health, and valuation, which may be more important for some investors than the overall depth and completeness of the database. While the primary focus of the services highlighted here and in the expanded online comparison grid is fundamental data for analysis and screening, services such as the Yahoo! Finance Java Stock Screener also offer extensive data related to intraday price movement.
An examination of both Table 1 and the comparison grid will help give you a complete picture of each service’s data emphasis.
No matter how complete we may think a screening database is, few if any will provide every screening variable we want. This is where the ability to create your own custom fields—and screen on them—becomes important. Custom fields allow you to create ratios omitted from the database or generate valuation models that attempt to determine the “fair” value of a stock. This feature is an important consideration if your analysis tends to be more specialized.
Historically, the ability to create custom screening variables has been left to software-based screening services. Among our Editor’s Choice selections, only SmartMoney.com Select offers custom variables. The Stockworm Screener, in our expanded online comparison grid, also provides this functionality.
Company information primarily consists of basic data such as a company’s Web address and phone numbers, where you can access company financial filings or contact the firm’s investor relations department. Usually a description of the company’s operations is also given, along with its industry and sector designations.
The primary driver of stock prices is expectations of future earnings and growth in earnings. One measure of market expectations is the consensus earnings estimate. Consensus estimates are calculated by polling the analysts tracking a given company. Services may also poll analysts to report their ratings on the overall attractiveness of stocks in an attempt to derive uniform consensus recommendations.
These estimates and recommendations allow investors to directly gauge the expectations that are built into a stock price. If expectations change, it is reasonable to expect the stock price to adjust to reflect the new consensus. Look for an indication of recent revisions in earnings estimates or an earnings (or revenue) surprise, which may impact share price for as long as a year.
Also, analyst forecasts of future quarterly and annual revenues are becoming increasingly popular: When companies exceed or fall short of revenue estimates, it is often reflected in short-term price movement.
Display of consensus buy/hold/sell recommendations is becoming more common as well. Some services also try to differentiate themselves with proprietary ratings and valuations. For example, Morningstar.com provides its proprietary “Star Ratings” as well as fair value prices for select companies in its database.
Valuations are an attempt to measure the price attractiveness of a given stock. Some services provide numerical valuation ratings, while others provide price targets based on proprietary models or consensus price targets from analysts.
|Screening Service||CBNC.com Stock Screener||Morningstar.com Premium Stock Screener||SmartMoney.com Select Stock Screener|
|Company||CNBC, Inc.||Morningstar, Inc.||SmartMoney.com|
|Price||free||$19.95/mo. or $179/yr. (14-day trial)||$5.95+/mo. or $58+/yr. (14-day trial)|
|Data Source||Thomson Reuters||Morningstar, S&P||Hemscott, Zacks, Thomson Reuters, Briefing.com|
|Database Content||Number of Stocks/Data Fields||10,000+ stocks/400+ fields||10,000+ stocks/800+ fields||8,400+ stocks/1,000+ fields|
|Company Information||Company Web link||Yes||Yes||Yes|
|Industry Grouping (Source)||Yes (Reuters/Thomson Financial)||Yes (Morningstar, SIC, NAICS)||Yes (Dow Jones)|
|Description Length||125 words||50 words||30 words|
|Estimates—Earnings & Revenues||Source||Thomson Financial/FirstCall||Morningstar||Zacks|
|Quarterly||Yes (EPS: up to 8 qtrs)||Yes (EPS: 2 qtrs)||Yes (EPS: 2 qtrs)|
|Annual||Yes (EPS: 1 yr)||Yes (EPS: 2 yrs)||Yes (EPS: 2 yrs)|
|Growth—Long Term||Yes (EPS)||Yes (EPS)||Yes (EPS)|
|Surprise||Yes (EPS: up to 14 qtrs, 7 yrs)||Yes (EPS: 4 qtrs)||Yes (EPS: 6 qtrs)|
|Revisions/Trend||Trend (last 6 mos); up/down revs (last 6 mos)||Yes (trend)||Yes (trend over last 3 mos)|
|Consensus Analyst Recommendations||Yes||Yes||Yes|
|Consensus Analyst Rec—Changes/Trend||Yes (trend, changes)||Yes (trend over last month)||Yes (changes, trend over last 3 mos)|
|Valuation/ Rating (Source)||Fundamental||consensus buy/hold/sell, consensus price target||Yes (Morningstar Grades & Fair Value)||Yes (consensus price target)|
|Ratios (Benchmarks)||Leverage||long-term debt/equity, long-term debt/capital||long-term debt/equity, assets/equity,||long-term debt/equity, debt/equity,|
|(industry, sector, market)||long-term debt/capital (sector, S&P 500)||long-term debt/capital, interest coverage|
|Liquidity||quick, current, payout (industry, sector, market)||current, quick, payout (sector, S&P 500)||current, quick, payout|
|Profitability (click here for key to abbreviations)||ROA, ROE, ROI, GM, OM, PM (industry, sector, market)||ROA, ROE, ROI, GM, OM, NM (sector, S&P 500)||ROA, ROE, ROI, GM, OM, PM|
|Multiples (click here for key to abbreviations)||P/E, P/B, P/S, P/CF, PEG, yield (industry, sector, market)||P/E, P/B, P/S, P/CF, PEG, yield (sector, S&P 500)||P/E, P/S, P/B, P/CF, P/FCF, PEG, yield|
|Turnover||total asset, inventory (industry, sector, market)||total asset, receivables, inventory, fixed asset (sector, S&P 500)||total asset, inventory|
|Historical Growth Rates||Elements||net income, EPS, sales, dividends||sales, EPS, book value, dividends, net income,||sales, EPS, dividends, R&D|
|FCF, Oper CF|
|Periods (Benchmarks)||5-yr (YoY), 1-qtr (QoQ),||qtr; 10 yrs yr-by-yr; 1-, 3-, 5-, 10-yr||qtr (YoY, QoQ), 1-yr, 3-yr, 5-yr (sector,|
|5-yr (industry, sector, market)||(index, industry, sector)||industry, index)|
|Total/Annualized||Yes (total & annualized)||Yes (annualized)||Yes (annualized)|
|Price & Share Data||High/Low/Close/Volume||Yes (52-wk high/low; high/low/close/volume)||Yes (52-wk high/low, high/low/close/vol)||Yes (52-wk high/low, high/low/close/vol)|
|Performance||% of 52-wk high, annual price perf (5 yrs), 1-, 3-, 12-mo trailing returns||Yes (YTD, 52-wk, 1 & 3 yrs)|
|Average Volume||Yes (10-day)||Yes||Yes (avg daily over last 3 mos)|
|Relative Strength (Benchmarks)||Yes (industry, S&P 500)||Yes|
|MPT Stats||Yes (beta)||Yes (beta)||Yes (beta)|
|Short Interest||Yes (ratio, % float, change)|
|Market Cap/Float/Employees||Yes (market cap)||Yes (market cap/employees)||Yes (market cap/float/employees)|
|Insider Holdings||Yes (total holdings)||Yes (number)||Yes (number, %)|
|Insider Trading||Yes (transactions; trail 12-mo, 3-yr, 5-yr)||Yes (transactions)||Yes (shares bought/sold, # trans, $ val)|
|Institutional Holdings||Yes (%, shares, top instit holders)||Yes (%, $ holdings, # funds owning)||Yes (%)|
|Institutional Trading||Yes (% chg, shares, $ volume, % shares out)||Yes (share change, transactions)||Yes (shares bought/sold over last 90 days)|
|Screening||Number of Data Fields for Screening||80+||440+||140+|
|Create Custom Data Fields||Yes|
|Against Constant Values||Yes||Yes||Yes|
|Against Other Data Fields||Yes||Yes|
|Against Benchmarks (Industry/Sector, Index, etc.)||Yes (industry, market)||Yes (sector, index)||Yes (sector, industry, index)|
|Number of Data Fields for Sorting||10||440+||140+|
|Save Custom Screens||Yes||Yes||Yes|
|# of Predefined Screens||5||9||24|
|Viewing||Browse Table||Yes||Yes||Yes (up to 300 companies)|
|Financial Statement Presentation||total $||total $, per share, % change, common size||total $, per share|
|Individual Company Summaries||Yes||Yes||Yes|
|Export Screening Results to a File||Yes||Yes (Excel, text)|
|Formatted for Printing||analyst & company reports||custom SnapShot, financial statements|
|Statistical Summaries||Yes (screening results)||distribution histograms of screening results|
When using valuations, it is important not to be seduced by the end numbers. Instead, consider the underlying assumptions, rationale and, perhaps most importantly, the reasonableness behind the rating or “fair price.” Some systems are qualitative in their approach, which is more subjective, while others are quantitative or data driven. If provided by a third party, the source of valuations is usually noted.
The comparison grids indicate if a service provides a fundamental or technical rating or valuation. Since risk and return are interrelated, the valuation segment of the grids also indicate if a risk measure or ranking is available.
Ratios are useful for summarizing financial statement data into a format that can be easily manipulated to compare year-over-year changes in the company, compare one company to another, or compare a company against sector, industry or market benchmarks.
GM = gross margin
P/E = price-earnings ratio
NM = net margin
P/B = price-to-book-value ratio
OM = operating margin
P/S = price-to-sales ratio
PM = profit margin
P/CF = price-to-cash-flow ratio
ROA = return on assets
P/FCF = price-to-free-cash-flow ratio
ROE = return on equity
FCF/P = free-cash-flow-to-price ratio
ROI = return on investment
PEG = P/E to earnings growth ratio
Leverage ratios examine the company’s use of debt in its financial structure. Prudent use of debt can enhance shareholder profitability. When a company takes on too much debt, it saddles itself with an interest payment that must be paid in good times and in bad. Failure to make these debt payments will lead to bankruptcy, which typically wipes out common equity shareholders. Commonly used leverage ratios include debt to equity, liabilities as a percentage of assets, long-term debt as a percentage of capital, and interest coverage. (See this issue’s Fundamental Focus column on page 20 for more on debt ratios.)
Liquidity ratios are meant to gauge a firm’s ability to meet its short-term obligations. While liquidity measures are of particular interest to creditors, you may wish to glance at these ratios if you are looking for high-yield stocks, as they provide an indication of a company’s ability to sustain or increase its dividend payments. Typical liquidity ratios include the quick ratio, current ratio, and dividend payout ratio.
Profitability ratios benchmark company performance, highlight trends when examined over time, and indicate strong or weak performance relative to other firms or sector/industry norms. Common profitability ratios include return on assets ROA, return on equity ROE, return on investment or invested capital ROI, gross margin (GM), operating margin (OM), and net profit margin (PM).
Multiples form the cornerstone of many fundamental screens, especially those that are value-oriented. They relate the current stock price to a tangible company item, such as earnings, sales, or book value per share. Multiples provide an indication of how the market values the company’s future prospects. Companies with (perceived) brighter futures typically trade with higher multiples; however, it is important to perform a thorough company analysis to get a complete picture of the company’s financial situation. Look for a broad range of multiples covering items such as earnings, book value, cash flow, and dividends. Some sites also measure the relationship between a company’s price-earnings ratio and its earnings growth, called a PEG ratio. Historical ratios help indicate normal trading ranges for a stock and provide a base for comparison against current multiples. Therefore, historical average multiples are a key element when choosing an online screening service.
Growth rates paint a picture of past company performance and provide an easy way to compare companies. Some investors seek out quickly growing firms with the hope that growth will continue to fuel the share price. Five-year growth rates for sales, earnings and dividends are typically the norm. The more robust services have a wider range of growth rates covering multiple time periods and data fields.
The comparison grids, both here and online, indicate which growth rates each Web site provides along with the time periods covered and their presentation format. The grids also detail if benchmarks are provided to help form reasonable comparisons and screens.
Price and share data describe various market-related aspects of a company’s common stock. The extent and detail of historical price and volume data are provided in the comparison grids.
If you focus on price momentum, look for enough price data to examine price movement or look for summary statistics such as relative price strength or percentage price change.
Other measures such as MPT statistics (modern portfolio theory measures—alpha, beta, standard deviation, etc.), relative strength and market capitalization are also indicated in the comparison grids.
Short interest is the total number of shares outstanding of a particular stock that have been sold short by investors but have not yet been covered or closed out. Short selling involves selling a stock you don’t own—you borrow it from a broker with the promise to deliver at a later date. If the price drops, you can buy back the stock at the lower price and make a profit on the difference. If the price of the stock rises, you have to buy it back at the higher price, and you lose money.
Short interest can also be expressed as a percentage (number of shorted shares divided by the number of shares outstanding) or as a ratio (the number of shares sold short divided by the average daily trading volume). However, it is becoming more difficult to find databases that allow screening on short interest data. Editor’s Choice pick SmartMoney.com Select provides short interest ratios and short interest as a percentage of shares outstanding, and it tracks the change in short interest.
Holdings and actions by insiders or institutions are also noted in the comparison grids both here and online.
Industry comparisons are useful in identifying stand-out firms. Multiples, growth rates, and ratios give you an added level of information when analyzed in the context of industry norms. Look for services that provide industry statistics or that at least allow you to screen for companies in a similar industry so you can analyze those firms as a group. Some sites even allow you to screen for companies outperforming industry norms.
Raw financial statement data serves as the basis for the calculation of ratios, growth rates and multiples. It is also useful for analyzing a single firm to identify trends, but it is more difficult to use directly in screening and ranking, or for comparing companies. Nevertheless, the better screening sites include enough information from the balance sheet, income statement, and cash flow statement to judge whether the ratios and growth rates properly reflect a company’s prospects.
Some sites offer practically no raw financial statement data, while others provide rich company histories. By examining the year-over-year earnings of a firm, you can gain a feel for performance consistency and earnings trends—which growth rates often hide. Table 1 details the financial statement information provided by our Editor’s Choice selections. We also provide this information for other sites in our expanded online coverage.
The core feature of any screening system is its set of screening capabilities. The comparison grids here and online include several categories that describe the screening features of each site. When designing a stock screening strategy, the service should allow you to screen against a constant value or another data field (a feature all of our top picks provide). More robust sites will also allow you to compare a value against industry and/or index norms or benchmarks. Services such as Yahoo’s Java-based screening module and the SmartMoney.com Select screener provide benchmark values for fields to help you construct reasonable comparative screening criteria.
One useful feature often lacking in Web-based screening tools is tracking the number of companies passing each individual filter or screening criterion. This functionality allows you to pinpoint the most restrictive filters of your screen—which comes in handy when you develop a screen that only has a few passing companies (or none at all). Relaxing the most stringent elements of a screen may increase the overall number of passing companies. Among the online screening services we looked at, only CNBC.com and Morningstar.com’s Premium Stock Screener track line-by-line screening results.
|Performance||Documentation||Ease of Use||Price||Pros|
|3||4||0||5||free||+One of the more robust free online screeners||–No documentation at all for stock screener|
|+Up to 14 qtrs/7 yrs of EPS surprises|
|+Screen on industry/market norms|
|+Proprietary appraisals & style categories||
–Lacks detailed quarterly financial statement data
|+Detailed financials and stock data|
|+Interactive & powerful stock Screen module|
|+Interactive & powerful stock Screen module|
|+Create custom variables for screening|
|+custom company reports|
Most simple Web-based tools do not allow you to save the screens you develop for use at a later time. This forces you to recreate the entire screen every time you visit the site. However, all of the Editor’s Choice picks highlighted here allow you to save your custom screens for future use. In addition, the comparison grids indicate those services that offer their own predefined stock screens.
Most online screening services list the companies passing a given screen in table form; some offer links within these tables for additional company-specific data and information.
When available, an individual company report will typically detail the information provided by the database for a company.
Tabular reports allow you to compare specific data items for a group of companies.
Less common, but very useful, is a report listing summary statistics for the set of passing companies or for a particular sector or industry.
Typically, the more robust an analysis tool is, the more difficult it is to learn how to use it effectively. The pure HTML-based services you find are often little more than boxes where you enter in minimum and maximum values for a predefined selection of data fields. While these services are easy to use the first time, repeated fine-tuning of your strategy can become very tedious, since they lack the functionality of saving custom screens.
Individual reviews of our Editor’s Choice selections below and the ratings in Table 2 address these issues, among others.
The CNBC.com stock screener is our new choice as the top free online screening service. The site has a robust collection of tools for individual investors, including one of the more advanced stock screeners available on the Web. Data is from Thomson Reuters and the site boasts a screening database of over 10,000 companies.
The screener has over 80 data fields for screening. When building a screen, users can specify whether a field is greater than/equal to, less than/equal to, or just equal to a chosen value. In addition, many fields allow you to specify whether a company is in the top or bottom 20th, 60th, or 80th percentile within its industry or the overall market. Another useful feature is the ability to see how many companies pass each criterion. The CNBC.com screener offers robust screening based on earnings revisions—you can screen based on the number of upward or downward earnings revisions over the last seven, 30, or 90 days. Also, you can save you custom screens for future use.
CNBC.com contains some of the most extensive quarterly earnings estimate data, with up to eight quarters. However, it only provides an annual consensus estimate for the current fiscal year.
For comparative analysis, the site offers sector and industry averages for a variety of valuation, financial strength, turnover, and profitability measures. Earnings growth projections are reported for industries, sectors, and the S&P 500. You can also compare the current price-earnings ratios for a company, its sector and industry, and the market to the respective forward price-earnings ratios based on consensus estimates for the next 12 months.
The site provides detailed financial statement data (income statement, balance sheet and cash flow statement) for each of the last five fiscal quarters and four fiscal years.
The institutional ownership data given is some of the more detailed found on the Internet today. Beyond offering percentage ownership statistics, there are turnover ratings for the top institutional shareholders, and breakdowns of institutional ownership by investment style (index, growth, yield, etc.) and geographic location.
Morningstar.com is a full-featured investment Web site providing portfolio tracking, market monitoring, stock and mutual fund screening and research, educational articles, and message boards. Visitors will find a good amount of free content at the site, while additional portfolio analysis, analyst research, and arguably the best online screening are available through the premium service for $19.95 per month (the price has increased almost 18% over the last two years).
Research on the site consists of stock screening coupled with research reports. Morningstar provides ratings and analyst reports on roughly 2,000 stocks in over 100 industries. These reports are restricted to premium subscribers, but all users can screen for stocks with high grades.
The premium screening module offers over 440 screening criteria and a database of 10,000 stocks. Subscribers may screen against sector and index benchmarks and save their custom screens. The Morningstar.com Premium Stock Screener allows you to screen based on year-over-year and quarter-over-quarter changes in a number of fields, a rarity among online services.
Comprehensive stock reports start with an overview snapshot and lead to: a detailed company profile; financial statements and ratios; charting; stock price performance statistics; stock, industry, and market multiples; earnings estimates and analyst opinions; industry snapshot; insider and institutional shareholder activity; SEC filings; and news. The financial statements provide 10 years of income statement, cash flow, and balance sheet data in total dollar, per share, and even common size formats. The only knock on Morningstar’s data set is that it does not include detailed quarterly statements. The premium reports add details including Morningstar ratings and analyst research.
The SmartMoney website combines the editorial content of the magazine with a rich array of useful investment tools and research. The free portion of the site covers the essentials—portfolio management, market news and updates, charting, company and mutual fund research, mutual fund screening, as well as educational articles on financial planning and investment analysis. However, the screening module is only available with a SmartMoney.com Select subscription, which begins at $5.95 per month.
The charting module covers a wide range of technical and fundamental factors and has a database of over 10,000 NYSE, NASDAQ, and Amex stocks. Its screener is interactive and provides access to over 140 data variables.
Subscribers can compare screening criteria against fixed variables. While the module does not handle direct comparisons against index and industry norms in the same way other services do, it does provide the values of various index norms that you can use for screening. Furthermore, the screener allows you to enter custom formulas and screen using them— which separates it from our other Editor’s Choice selections.
Users can save custom screens, and there are over 20 predefined screens from which to choose. Once you run a screen, you can create a spreadsheet and download a report on the passing companies with the data fields you want. You are also able to generate custom “snapshot” reports with user-defined data groupings in PDF format.
In addition, the SmartMoney site, by far, has the deepest set of financial statement data of any of the sites in this comparison—15 quarters and 10 years of income statement, cash flow statement and balance sheet data.