Upbeat music plays throughout.
Narrator: The Stock Screener on schwab.com is a powerful tool for finding stocks that meet specific criteria, including value stocks.
We can access the Stock Screener by pointing to Research. Under Research Tools, select Stocks, then Stock Screener. There are some predefined screens you can choose from, but we're going to build our own screen from scratch.
Let's say I want to find stocks based on valuation ratios like price-to-earnings, price-to-book, and price-to-sales.
For example, as a value investor, I may want to find stocks with favorable P/E ratios, perhaps under 20. So, under Choose Criteria, I'll select Valuation, then price-to-earnings (TTM) trailing twelve months. I'll then select 10 and 10 to 20.
Value investors may also look for a low price-to-book ratio, perhaps under one. So, I'll select price-to-book (MRQ), most recent quarter. Then, select a value of less than one.
Lastly, value investors may also look for a low price-to-sales ratio, perhaps less than two. So, I'll select price-to-sales (TTM), or trailing twelve months, and select less than 1 and 1 to 2.
That's a pretty good starting place, but there's still a lot of results.
You can further customize by adding additional criteria.
Let's say you want to avoid penny stocks and only see results with prices above $10. To do this, expand the Basic menu and select Price. As you can see, adjusting the price threshold narrows the number of matches.
Or say you want to find stocks that can be easily traded. You can filter for stocks with a high trading volume to eliminate illiquid stocks. I'll select Average Volume (10 Day) and screen for stocks with volume greater than 250,000 shares.
Keep in mind, some stocks might appear to be a good value right now, but the company could be losing revenue over time.
Under Company Performance, you'll see Revenue Growth History. To eliminate any stocks that are operating at a revenue loss, I'll choose Last 3 Years and screen for stocks with a revenue growth rate greater than or equal to 0%.
You see, I have a pretty reasonable number of matches. In general, you might want to look for somewhere between 30 and 50 results. From that list, you can do further analysis.
Let's take a look at the results.
When viewing the matches, select the ticker symbols to learn more about the individual stocks. From the stock's profile, you can scroll down to the Peers & Ratios Comparison section. Here, you can find relevant metrics to help conduct a quick cross-sectional analysis to gain more insight into the company's effectiveness.
For example, if you select Valuation tab, you can compare a company's price-to-earnings, price-to-book, and price-to-sales ratios to other companies in the same industry.
Whenever you're experimenting with new searches, it's always a good idea to save the search so you can easily find it again.
When you're looking at your results, select Save Screen and give the search a new name, such as "Value Search."
Now that it's saved, this screen will appear on the main page of the Stock Screener under My Recently Saved Screens.
When you create a new search or even modify a previous search, take the time to compare your new results to the old. Did your changes increase the quality of your results? Or did it make the list too restrictive or accommodative? Over time with trial and error, you'll learn to customize your criteria to fit your style and make your investing process more efficient.
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