MARKET COMMENT
Where To Find Your Next Share Winner

By Maynard Paton (TMFMayn)
September 1, 2004

Stock-screening websites are one of the seven wonders of online investing. Simply key in a few valuation or accounting parameters and -- hey presto! -- a list of suitable shares is instantly produced.

However, online share filters do have their limitations. For starters, accounting has never been a straightforward practice and opinions vary on how to interpret, for example, reported earnings per share and balance sheet figures. This creates problems with filter favourites such as the price to earnings (P/E) ratio and return on capital.

In addition, many of the bookkeeping ratios used for trawling the market are based on a single year's accounts and may not be representative of the company's longer-term performance. And of course, no data supplier is perfect and innocent mistakes in the compilation of the figures can sometimes occur.

Cursory visits to three popular share screening sites -- www.companyrefs.com, www.sharelockholmes.com and www.planetmong.com/screener -- emphasise the type of discrepancies that can be found.

For instance, the three sites couldn't agree on last night's market value of Tesco (LSE: TSCO). Company Refs said it was £20,583m, Sharelock gave £20,638m while Planetmong supplied £20,422m (which matched the figure from Bloomberg).

Other Tesco calculations were also up for debate. Company Refs gave a gearing figure of 57%, while Sharelock and Planetmong declared it was 51% and 48% respectively. The supermarket's PEG ratio was also disputed. REFS calculated it to be 1.30, Sharelock claimed 1.46 and Planetmong gave 1.75.

The difference in statistics obviously causes varying filtering results. The following criteria -- a P/E of less than 10, a dividend yield greater than 5%, prospective earnings growth exceeding 10% and a price to tangible book value of below 1 -- failed to provide a mutual selection among the three screeners.

Company Refs returned Booth Industries (LSE: BTHI), Churchill China (LSE: CHH), Infast (LSE: INS), Royal & Sun Alliance (LSE: RSA), Sirdar (LSE: SRDR), Swallowfield (LSE: SWL) and Eliza Tinsley (LSE: TNL), Sharelock supplied Albion (LSE: AON), Churchill China, Highbury House Communications (LSE: HHO), Molins (LSE: MLIN) and RSA, while Planetmong named Molins and SVB (LSE: SVB).

But despite all the drawbacks, share filters can provide an extremely useful first step to finding your next portfolio winner. As well as the three screeners mentioned, other websites worthy of consideration are www.fundies.info and www.itpaysdividends.co.uk, both of which focus on FTSE 350 shares and whose price data is not updated daily.

Beware though that subscription costs and the manpower behind the screeners vary widely (not all are free and some are one-man bands) and double checks with the relevant annual report and further research should be made prior to forming any investment decision.

More: Company Refs | Sharelock Holmes | Planetmong | Fundies Info | It Pays Dividends