Tech Stock Screening 101: 3 Steps to Smarter Investing

Effective stock screening is crucial for investors, particularly in the dynamic tech sector. It allows you to filter through thousands of stocks to find potential investments that match your criteria. In this tutorial, we’ll show you how to find interesting stocks and compare them using TradingView, a powerful and intuitive platform that offers robust screening tools even on its free plan.

Why Use TradingView?

TradingView stands out for its user-friendly interface, comprehensive data, and powerful charting tools. Its stock screener is particularly useful for both beginners and experienced investors, offering a wide range of filters and metrics even on the free plan.

Step 1: Navigate to the TradingView Stock Screener

Start by visiting the TradingView stock screener at https://www.tradingview.com/screener/. This tool allows you to filter stocks based on various criteria.

Select the market and sector relevant to your search. For this tutorial, we’ll focus on the technology sector.

Step 2: Add Comparable Companies to Your Watchlist

Before making decisions based on absolute values and metrics, it’s important to compare the stock with others in the same industry. Here’s how to select appropriate comparables:

1. Identify the specific sub-sector or industry of your target stock (e.g., cloud infrastructure for Cloudflare)
2. Look for companies with similar business models, market cap, or target markets
3. Add these companies to your watchlist by clicking the flag icon next to each company name

For example, if you’re interested in Cloudflare (NET), you might compare it with other cloud infrastructure providers like Amazon AWS, Microsoft Azure, or Google Cloud.

Step 3: Compare Metrics in the Watchlist

Once you have added all the companies for comparison, go to your watchlist to view and compare the key metrics. This includes important financial indicators such as:

• Earnings Per Share (EPS): Indicates profitability on a per-share basis
• Price-to-Earnings (P/E) Ratio: Shows how expensive a stock is relative to its earnings
• Revenue Growth: Particularly important for tech companies, which often prioritize growth
• Gross Margin: Reflects the efficiency of the company’s operations
• R&D Expenses: Indicates investment in future innovations
• Debt-to-Equity Ratio: Shows the company’s financial leverage

Now you can look and compare all interesting metrics from the marked menu bar.

At this stage, analyze and compare various metrics. Understanding which metrics are most relevant for tech stocks is crucial. Remember to interpret these metrics within the context of the specific sub-sector and the company’s stage of growth.

Customizing Your Screen

TradingView allows you to create custom screens based on your investment strategy. Consider factors like market capitalization, revenue growth rate, profitability metrics, and valuation ratios. Experiment with different combinations to find stocks that meet your specific criteria.

Next Steps

After screening, it’s crucial to conduct deeper research:

1. Analyze the company’s financial statements
2. Study the industry trends and competitive landscape
3. Review recent news and analyst reports
4. Consider the company’s management and corporate governance

Conclusion

By following these three simple steps, you can effectively screen and compare tech stocks to make well-informed investment decisions. Remember, screening is just the starting point of your investment research process. Always conduct thorough due diligence before making any investment decisions.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always do your own research and consider your financial situation before making investment decisions. Past performance does not guarantee future results, and all investments carry risk.