If you want to see an example of a predefined palpable set of screener criteria, you can load one here:
This is how it might look
This is the subjective set of criteria that describes a decent company (in our humble opinion). So, what makes the company a worthy one?
- Market Cap > $5bn. We suggest using SCRAB to analyse companies with at least a few billion dollars of market cap because usually, there are not so many analysts covering small-cap companies, and the quality of data is often poor. Still, it's really up to you as to whether you stick to that suggestion or not.
- EPS Average Estimated Annual Growth in the Next 2 Years > 7. EPS (Earnings per Share) is one of the most critical indicators of a company's profitability. We want to invest in profitable companies, but more than that, we want to invest in companies that will be profitable in the future. In this case, 7% means we want to see only companies that will earn more profits year-on-year for the next two years, and these profits will compound to at least 7% on average (according to forecasts made by the consensus of analysts).
- Revenue Average Estimated Annual Growth in the Next 2 Years > 5. The same as above, but the revenues usually can't grow as fast as the earnings hence the lower threshold. Nevertheless, investing only in companies with positive growth prospects, at least in revenues, is extremely important. 5%, on average, is a decent score.
- EPS Long Term (5 Years) Growth Estimates > 7. Usually, if we intend to invest over a more extended period, we would like it when the company's EPS grows at least 7% not only in the next two years but also in the longer term. Unless you're a short-term speculator, of course, but in that case, the fundamentals don't matter that much anyway.
- Debt to Assets < 50. Avoiding companies with heavy debt loads might be a good idea most of the time, just in case. Debt to Assets less than 50% means that on every $0.50 of debt, the company has at least $1 of assets as a cover.
- CFO to Debt > 0.1. Earnings and revenue are essential, but these are only numbers on paper. Cash is king, and the cash from operating activities is the king of kings. We want the company to generate at least $0.10 CFO (Cash from Operations) for every $1 of debt it owns.
- Interest Coverage > 2. This means the company can use its last yearly profit to pay off its debt interests for at least two more years. That makes it a kind of safe bet in terms of solvency.
- Current Ratio > 1. This indicates that the company has more short-term assets (i.e., cash or inventory) than short-term liabilities (invoices or salaries to pay). If the inventory is not the most of the assets, the company has enough liquidity to survive at least another year.
- Ohlson Score Default Probability < 10%. This is a good indicator of the company's probability of going bankrupt in the next 12 months. Too complicated to explain here, but you can read about it on Wikipedia.
If you run a screener with these criteria, you should see the list of probably 400-500 companies out of the 37 000 we cover. A nice set to begin work with.
If you want to tweak the criteria but are afraid of overwriting the original parameters, you can copy/clone the predefined set and save it under a different name. Then you can freely customise the new set however you want.
Alternatively, you can also set your own criteria from scratch, which is always the recommended way since it best suits your investing approach.