With over 10,000 publicly held companies available as investments, you need some help whittling the field down to a few companies for further study. Many companies aren't good investments. Some don't grow enough. Some don't grow at all. Others are growing, but cost too much to offer you a sufficient investment return. Others are growing and reasonably priced, but too risky for your peace of mind. Weeding out all these companies typically narrows your candidates significantly. In addition, you can narrow the field further if you're looking for companies in specific industries or with a particular market capitalization to satisfy your portfolio diversification objectives . It doesn't do much good to identify desirable characteristics, unless there's an easy way to filter the list for stocks that possess those features. Fortunately, that's exactly what stock screening does, and free stock screening tools abound on the Web.

Stock screening tools are black and white. When you define a criterion, a company either meets it or doesn't. For example, if you screen for EPS growth rate of greater than 15 percent, a company growing at 14.9 percent won't show up. Overly rigorous screening criteria might weed out companies that you should consider. One way to correct this failing is to adjust your criteria until the screen returns eight to twelve stocks. Then, you can compare the companies' financial measures to identify the three or four you want to study in depth.

Don't try to screen all the way to the final four stocks for your in-depth study and under no circumstance screen to only one stock! Keeping your criteria more flexible enables you to catch companies that don't quite fit your criteria but are worth consideration, such as high-quality companies that are currently overpriced. Besides, companies are more than their numbers . For example, a stock screen can find companies with attractive historical earnings and sales growth, but it can't tell you which companies are positioned to continue their growth into the future.