8 Helpful Filters for Your Stock Scanner, and What Each One Tells You
Every filter in a stock screener is a question you put to a company. Do you make money? Do you owe a lot? Is anyone trading you today? Eight of them make a good first set, and each one has a blind spot worth knowing before you trust the answer.
This guide goes through eight stock screener filters one at a time. For each you get what it measures in plain words, a sensible starting range, what it cannot tell you, and the ready-made idea in Rapunzl's Stock Scanner that uses it. The ranges come from those ideas. They are places to begin, not rules.
A screen only produces a list of companies to research. Nothing here is a recommendation to buy or sell any stock.
How to read a filter before you use it
Each filter below gets the same four checks: what it measures, a starting range, what it leaves out, and an idea that uses it. If you have never run a screen, the step-by-step guide to using a stock screener covers the habit of changing one filter at a time.
Every idea named below is in Rapunzl's Stock Scanner, where you can open it, read its recipe and change the numbers.
P/E ratio: what you pay for each dollar of profit
The P/E ratio divides the share price by the profit the company made per share over the last 12 months. The lower the number, the less you pay for each dollar of profit.
A sensible starting range is 0 to 15. That is what the "Bargain hunters" idea uses, on profitable companies worth $2B or more. For a wider net, "Quality at a fair price" allows a P/E up to 25 and also asks for a return on equity of 15% or more and debt of 1 or lower.
What it cannot tell you is why the number is low. The scanner's note on this filter says investors may expect the profit to fall.
Dividend yield: how much cash a share pays out
Dividend yield is the cash a company paid its shareholders over the last 12 months, as a percent of the share price. A 3% yield means about $3 a year for every $100 of stock.
Start at 3% or higher on companies worth $2B or more, the way the "Pays you to own it" idea does. The "Dividends that grow" idea loosens the yield to 2% but also asks for sales growth of 10% or more and a profit above zero, so the payout has something behind it.
The blind spot is the price. A very high yield can happen because the price fell, and a company can cut its dividend at any time.
Debt-to-equity and current ratio: can it get through a bad year?
Debt-to-equity compares what a company has borrowed with the money its owners have put in. The current ratio, which the scanner calls the cash cushion, compares the money and short-term assets a company has with the bills it must pay within a year.
"Rock-solid finances" starts at debt-to-equity of 0.5 or lower and a current ratio of 1.5 or higher, on profitable companies worth $2B or more. A looser start is debt of 1 or lower, which "Quality at a fair price" uses.
Neither number travels well between industries. A normal amount of debt depends on the line of business, and some healthy businesses run a current ratio below 1.
Revenue growth: is the business getting bigger?
Revenue growth, which the scanner calls sales growth, compares a company's sales over the last 12 months with the 12 months before.
"Fast growers" starts at 20% or more for sales and asks for profit growth of 20% or more as well, on companies worth $2B or more. For a gentler start, "Dividends that grow" asks for sales growth of 10% or more.
Sales can grow while profit shrinks, which is why Fast growers checks both. Growth is also hard to keep up, and the idea's own warning is that prices of growth stocks can fall hard if growth slows.
Price vs the 50- and 200-day averages: which way has it been heading?
These filters compare today's price with its average price over the last 50 trading days, about 10 weeks, and over the last 200. A plus number means the price is above the average.
The starting range is above zero on both. "Strong uptrends" does this on companies worth $2B or more and adds a trend-strength score on top. If you want to see how an average is built, our guide to the moving average shows it step by step.
An average looks backward, so it is slow to show that a trend has changed. The shorter one reacts faster but also gives more false alarms than the long one.
RSI: how fast has the price moved lately?
RSI is a score from 0 to 100 for how fast a price has risen or fallen over the last 14 trading days. Under 30 is called oversold, meaning the price fell fast. Over 70 is called overbought, meaning it rose fast.
Two ideas use those lines. "Big companies looking oversold" keeps RSI under 30 on companies worth $10B or more. "Running hot" keeps RSI over 70 on companies worth $2B or more.
The word oversold sounds like a promise of a rebound, and it is not one. A stock can stay oversold for a long time while it keeps falling. Over 70 does not mean the price will drop either, because strong stocks can stay overbought for weeks.
Relative volume: is today unusually busy?
Relative volume compares today's trading with the 20-day average, so a 2 means twice as many shares as usual.
"Unusually busy" starts at 2 or higher, with a price of $5 or more and an average volume of at least 200,000 shares, which keeps thinly traded stocks off the list.
High volume says that many people are trading. It does not say which way the price will go. Early in the trading day the number is also small, because only part of the day has passed.
Distance to support: how close is the floor?
Support is a price level where a stock has often stopped falling and buyers stepped in. Distance to support is how far the price sits above the nearest one, in percent. A companion filter rates that support from 1 (weak) to 3 (strong).
"Near a strong floor" keeps companies within 1% of a support rated 3, worth $10B or more and trading above their 200-day average.
Support is drawn from past prices, so a floor can give way. When one breaks, a stock can fall quickly.
How to combine two or three filters
A screen works best when every filter asks a different kind of question. Pick one about the business, one about the price, and if you like, one about the chart. Two ideas in the scanner show the pattern.
- "Quality at a fair price" mixes return on equity, P/E and debt, so it asks about how well the business earns, what you pay and how much it owes.
- "Cheap and oversold" pairs a P/E of 15 or less with an RSI under 35, a price question next to a chart question. Its own warning applies to every combination like it: cheap and falling can be a trap, because the price may be low for a real reason.
Filters are not the same age, either. The scanner says fundamentals such as P/E come from each company's latest SEC filing and indicators such as RSI from the last close, so a screen that mixes them looks at two different moments. The step-by-step guide linked earlier has a table of which filters are fresh. Our guide to leading and lagging indicators explains why chart measures run late. Practice reading what you find in Rapunzl's simulator, where nothing real is at stake.
The eight filters at a glance
| Filter | Starting range (idea that uses it) | What it measures | What it cannot tell you |
|---|---|---|---|
| P/E ratio | 0 to 15 (Bargain hunters) | Share price divided by profit per share | Why the number is low |
| Dividend yield | 3% or more (Pays you to own it) | Cash paid out as a percent of the price | Whether the dividend will last |
| Debt-to-equity and current ratio | 0.5 or lower and 1.5 or higher (Rock-solid finances) | Borrowing against owners' money, and cash against yearly bills | What is normal for the industry |
| Revenue growth | 20% or more (Fast growers) | Sales over 12 months against the 12 before | Whether profit is growing too |
| Price vs 50- and 200-day averages | Above both (Strong uptrends) | Where the price sits against its short and long trend | That the trend has turned |
| RSI | Under 30 or over 70 (Big companies looking oversold, Running hot) | How fast the price rose or fell over 14 days | When a stretched price will reverse |
| Relative volume | 2 or higher (Unusually busy) | Today's trading against the 20-day average | Which way the price will go |
| Distance to support | Within 1% of a strong support (Near a strong floor) | How far the price is above the nearest floor | Whether the floor will hold |
Frequently Asked
Questions
Start with company size and one question you are curious about, such as profit, dividends or debt. The scanner's ready-made ideas bundle a few filters and explain why anyone looks at that list.
There is no single good number. The scanner's "Bargain hunters" idea uses 0 to 15 and "Quality at a fair price" allows up to 25, and both are starting points to adjust. Compare a company with others in its industry before reading the number.
No. They describe what the price has done, and they look backward. A stock can stay oversold or overbought for a long time.
Debt-to-equity is about how much a company has borrowed compared with its owners' money. The current ratio is about whether it can cover the bills due within a year. A company can look fine on one and weak on the other, which is why "Rock-solid finances" asks for both.
Try these filters with your class
If you teach economics, personal finance or business, request a demo and we will show you how the Stock Scanner, the charts and the simulator fit together for your students.
Families: if you want your own student to explore the scanner at home, Rapunzl for families is the place to start.
Screens, filters and examples in this article are for education and are not investment advice or a recommendation to buy or sell any security.
By Myles Gage, CEO & Co-Founder at Rapunzl.