How to Find Quality Stocks: A 6-Step Guide Using a Stock Screener

With over 5,000 companies listed on the Indian stock market, figuring out where to start can feel overwhelming. You could spend weeks going through names, only to realise most of them just aren't worth your time.

That’s why the real challenge lies in narrowing down the list and focusing on a handful of fundamentally strong stocks. And that’s exactly what Finology Ticker helps you do.

This guide walks you through, step by step, how to use Finology Ticker to spot companies that are genuinely worth considering.

Table of contents

1. What is a stock screener?
2. How does a stock screener actually help?
3. How to pick fundamentally strong stocks using Finology Ticker
4. Evaluating the business beyond numbers
5. Conclusion
6. Frequently Asked Questions (FAQs)

What is a stock screener?

A stock screener is an online tool that lets you filter listed companies based on key financial metrics like market capitalisation, growth, and debt. Instead of checking each stock manually, you set simple rules, say, Debt to Equity less than 0.5, and it shows only the companies that meet those criteria. It’s like using search filters while shopping online, but for stocks. It helps cut through the clutter and keeps your focus on fundamentally strong companies from the start.

How does a stock screener actually help?

Using a screener isn’t just about convenience; it’s about improving the quality of your stock selection, right from the start. Here’s how:

• Saves time: Let’s be honest, going through hundreds of stocks one by one is not just boring, it’s unmanageable. A stock screener helps you get rid of that headache instantly by narrowing your list to the ones that actually meet your criteria.
• Cuts out weak companies early: Instead of wasting time reading into loss-making or overleveraged companies, you can set simple rules like profit growth above 20% or Debt to Equity under 0.5 and avoid low-quality businesses from the start.
• Brings consistency: Without a clear approach, stock picking can feel like guesswork. One day you’re following a tip, the next you’re chasing headlines. A stock screener helps you stick to filters that actually make sense to you, making your decisions smarter and based on actual numbers.
• Helps with comparison: When you see ten companies side by side with all key metrics visible, like ROE, margins, growth, patterns start to emerge. You can instantly tell who’s standing out and who’s not worth a second look.

Wrap-up: A stock screener helps you invest with more clarity and control. It helps you save time, stay consistent, and focus only on quality companies. With clear filters and side-by-side comparisons, your stock picks become more deliberate and data-driven.

How to pick fundamentally strong stocks using Finology Ticker

Here’s how to use Finology Ticker to spot fundamentally strong companies, step by step.Let’s break it down.

Step 1: Apply the Market Capitalisation filter (MCAP > ₹1,000).

Go to Screener on Finology ticker. Start by typing MCAP > 1000. This will show you all the companies with a market capitalisation above ₹1,000 crore.



Now, most of you might be wondering, why greater than 1000?

Here’s the rationale. Companies with a market cap below ₹1,000 crore come with too much uncertainty. They’re usually more volatile, less liquid, often lack business or market history, and have limited resources. On top of that, their high cost of capital makes scaling harder and increases the survival risk.

The data backs this up. Out of over 5,000 companies listed in the Indian stock market, 3,646 had a market cap below ₹1,000 crore. A closer look at this group reveals several red flags:

• 53% of these micro-caps failed to grow their sales
• 46% failed to grow their profits
• 45% did not generate income from operations over the last 5 years

Given these risks, we exclude this segment and focus on the 1,470 companies with a market capitalisation above ₹1,000 crore. These are relatively stable and established businesses that form the base for further analysis.



Now that we’ve narrowed it down to the bigger players, the next question is, are they actually growing?

Step 2: Filter by Sales Growth % ( Net Sales 5 yr CAGR > 10 )

Now that we’ve filtered by size, the next step is growth. If a company isn’t growing its revenue, it’s probably not going anywhere.

We applied a filter for companies with over 10% annual sales growth over the past five years. This helps eliminate businesses that are falling behind the broader economy.



India’s real GDP has been growing at around 6.5% annually; however, this figure doesn’t tell the full story. Real GDP strips out inflation. When it comes to evaluating revenue growth, what really matters is nominal GDP, which includes both real growth and inflation. Over the past five years, India’s nominal GDP has grown at a rate of approximately 10% per year.

So if a company isn’t even keeping pace with that, it’s underperforming the economy in nominal terms and gradually losing relevance. If a company can’t outpace inflation, it probably lacks pricing power or the demand just isn’t there.

After this filter, we were left with 778 companies that are growing fast enough to keep up with or even outpace the broader economy.

Step 3: Filter by Earning Per Share growth % ( EPS 5 yr CAGR > 10 )

Revenue growth is important, but it should also lead to sustainable profit growth for shareholders. That’s why we filtered for companies with EPS growth above 10% CAGR over the past five years.

Sales growth shows that a company is expanding its business, but that alone isn’t enough. A company might grow revenue without improving profitability, due to rising costs, poor pricing power, or inefficient operations. On the other hand, even net profit growth can be misleading if it’s driven by debt or gets diluted across an increasing number of shares.

That’s where EPS (Earnings Per Share) comes in. It shows whether profit per share is actually rising, after accounting for dilution, interest, and taxes. EPS is a cleaner indicator of real shareholder value because it reflects not only business growth, but also how much of that growth is distributed to each shareholder.

After applying this filter, we were left with 634 companies that have consistently delivered rising profits per share.

Step 4: Filter by Return on Equity % ( ROE 5 yr Avg > 20 )

So far, we’ve filtered for companies that are large, growing, and profitable. But just being profitable isn’t enough. What matters just as much is how efficiently the company uses shareholders’ money to generate those profits.

To find that out, we will apply a filter for Return on Equity (ROE).

Return on Equity shows much net profit a company generates for every rupee of equity capital. A consistently high ROE is usually a sign that the business runs efficiently, uses capital wisely, and has enough pricing power to protect its margins. It means the company isn’t just earning profits, it’s doing it in a way that actually creates value for shareholders.

After applying this filter, the list narrows to 202 companies that have delivered strong returns on shareholder capital year after year.



Step 5: Filter by CFO to PAT Ratio ( CFO by PAT 5 yr Avg > 1 )

Next, we assessed the quality of reported profits by filtering for companies with a 5-year average CFO/PAT ratio greater than 1. This helps ensure that profits are backed by real cash flows, not just accounting figures.

A CFO/PAT ratio above 1 means the company consistently converts its reported profits into cash, which is a strong sign of financial health.

Many companies may appear profitable but struggle to generate actual cash. This filter removes those that might be manipulating earnings through tactics like delayed expense reporting or inflated revenue.

It helps us focus on businesses that are genuinely profitable, not just on paper.

After applying this filter, the list dropped to 61 companies with clean, cash-backed earnings.



Step 6: Leverage Filter (Debt to Equity Y1 < 0.5)

Finally, we filter out highly leveraged companies. Too much debt can destroy shareholder returns, especially when interest rates rise or cash flows slow down.

We therefore retained only companies with a Debt-to-Equity ratio below 0.5, meaning borrowings comprise less than half of their capital.

This matters because:

• Low interest burden: When a company has less debt, it doesn’t have to spend much on interest. That matters because interest payments eat into profits. A business with low debt retains more of its earnings, which directly improves net profit and return on equity.
   
• Easier access to capital when needed: Clean balance sheets build credibility. So, when a low-debt company needs funds for a project or acquisition, it's more likely to receive faster approvals and better terms than a company already burdened with debt.
   
• Profits can be reinvested for growth: When a company has a lot of debt, a significant portion of its profits is allocated to repayments. However, a low-debt company doesn’t face that pressure, so it can reinvest its profits to grow the business through expansion, new plants, improved products, or upgraded technology.
   
• Better stability during tough times: When demand falls or interest rates rise, heavily indebted companies run into trouble. Their repayments stay the same, even if their profits drop. That puts pressure on cash flows and increases the risk of default. In contrast, low-debt companies don’t have large fixed repayments, so they’re better placed to handle a slowdown.

After applying this filter, we’re left with just 53 companies that have strong balance sheets and minimal debt levels.

Wrap-up: This 6-step process filters companies on essential factors like size, growth, profitability, efficiency, cash flow, and debt. By applying these filters helps you quickly narrow down thousands of stocks to a focused group of high-quality companies. This way, you spend less time sorting through noise and more time researching businesses that truly deserve your attention.

If you’re ready to put these filters to work, this video shows you exactly how to do it inside Finology Ticker, step by step. Check it out now.

Evaluating the business beyond numbers

We’ve gone from over 5,000 listed companies to just 53 that are financially sound, growing steadily, and consistently profitable. That alone has filtered out 99% of the market.

But numbers alone don’t tell the whole story.

So it's also important to look beyond the balance sheet. This means looking at things like:

• How clear and sustainable the business model is
• The track record and integrity of the management
• Level of industry competition and regulatory risks
• Red flags like promoter pledging or frequent auditor changes

This helps you avoid companies that might look good on paper but carry risks the numbers don’t show.

Wrap-up: We’ve narrowed the list drastically, but the real work begins now. Digging beyond the numbers helps you spot hidden risks and understand the company’s true potential. Combining solid financials with a careful qualitative review provides a clearer, safer path to better investments.

Conclusion

You don’t need to track every stock. You just need a smart process and the right tool to cut through the noise and show you where to focus.

This 6-step process isn’t the finish line; it’s the starting point. It helps you cut through the clutter and focus only on companies that are actually worth your time and research. And that’s exactly what Finology Ticker is built for, to make stock picking smarter and simpler.

Want to understand how FIIs influence stock trends and how to track their moves? Start with this detailed guide on Finding FII stocks using Screener.

Frequently Asked Questions (FAQs)

1. What exactly does a stock screener do?
   It helps you filter thousands of listed companies using specific financial metrics like profit growth, low debt, or high ROE, so you can focus only on the ones that meet your criteria. It's essentially a shortcut to identify quality companies without manually reviewing each one.
    
2. Do I need to know finance to use a stock screener?
   Not really. You just need a basic understanding of what each metric means, like sales growth, EPS, or debt levels. And even if you don’t, Finology Ticker has that covered. Just open any company page and hover over the ⓘ icon next to each metric, and you’ll see a simple, clear explanation right there. It’s designed to help you learn as you go.
    
3. Can I save my screen in Finology Ticker?
   Yes, once you create a set of filters, you can save them for future use. This makes it easy to revisit your screen later or check how the list changes over time.
    
4. How many filters should I apply at once?
   You can apply as many filters as you want. But starting with 3 to 6 well-thought-out filters is a good idea. Too few, and you’ll end up with a long list full of weak or irrelevant companies. Stack too many, and you risk filtering out even the good ones. The goal is to strike a balance, just enough filters to cut the noise while keeping quality businesses in the mix.
    
5. Is using a screener enough for stock picking?
   Not really. A stock screener is a solid first step, as it helps you narrow down to fundamentally strong companies. But that’s only part of the process. To make smarter investment decisions, you also need to dig into the business model, evaluate the management, understand key risks, and think through the company’s long-term potential.