Stock Screening Mastery: 10-Point Filter to Find Quality Companies

⏱️ 20 min read 🏷️ Stock Screening 📊 Professional Framework 📅 Saturday, July 13, 2025

🚀 The Challenge: Finding Quality in the Chaos

Imagine staring at over 4,000 listed companies on Indian stock exchanges, trying to decide which ones deserve your hard-earned money. Without a systematic approach, you're essentially throwing darts at a board blindfolded.

Today, we'll solve this problem with the proven 10-pointer screening framework that professional investors use. You'll see exactly how to filter 4,000+ companies down to just 29 quality stocks, complete with real Screener.in demonstrations and live company comparisons.

By the end of this masterclass, you'll have the exact systematic process to identify quality companies, avoid value traps, and build a watchlist of investment-worthy stocks.

🎯 What You'll Learn

🔍 10-Point Screening Framework

Master the systematic 10-point filter that narrows 4,000+ stocks to 29 quality companies using quantitative metrics and qualitative assessment.

💻 Live Screener.in Demo

Watch live demonstration of building advanced screening queries, applying filters, and interpreting results like professional analysts.

📊 Quality Company Analysis

Deep dive into TCS, HDFC Bank, Asian Paints and other companies that pass the filter with comparative ratio analysis.

⚡ Advanced Screening Techniques

Learn customization strategies, sector-specific adjustments, and how to avoid common screening mistakes that trap beginners.

🎯 From Screening to Investment

Bridge the gap between screening results and actual investment decisions with post-screening analysis framework and portfolio integration.

📋 The Complete 10-Pointer Framework

Systematic criteria that separate quality companies from market noise

1. Market Cap

> ₹15,000 Cr

Large-cap stability and liquidity

2. Revenue Growth

> 10%

Consistent business expansion

3. Profit Growth

> 5%

Profitable growth trajectory

4. Return on Equity

> 15%

Efficient use of shareholders' money

5. ROCE

> 15%

Strong capital allocation

6. Debt to Equity

< 2

Manageable debt levels

7. Current Ratio

> 1.5

Strong liquidity position

8. Operating Cash Flow

Positive

Real cash generation

9. Free Cash Flow

Improving

Better cash generation trend

10. FII Holding

> 10%

Institutional confidence

💻 Live Screener.in Demo: From Theory to Practice

Watch the exact process to filter 4,000+ companies down to 29 quality stocks

🎯 Step-by-Step Screening Process

Follow this exact sequence to build your quality stock filter

Navigate to Screener.in

Go to Screener.in → Click "Screens" → Select "Create New Screen"

Build Your Query

Type each criterion using natural language with AND operators:

Market Capitalization > 15000 AND

Sales Growth > 10 AND

Profit Growth > 5 AND

ROE > 15 AND

ROCE > 15 AND

Debt to Equity < 2 AND

Current Ratio > 1.5 AND

Operating Cash Flow > 0 AND

Free Cash Flow Last Year > Free Cash Flow Preceding Year AND

FII Holding > 10

✅ Screening Results: 29 Quality Companies Found

Out of 4,000+ listed companies, only 29 pass all criteria - demonstrating how stringent quality filters eliminate the vast majority of stocks.

TCS

Infosys

Asian Paints

Havells

Polycab

KEI Industries

Supreme Industries

Divi's Labs

Astral Pipes

Pidilite

+ 19 more quality stocks

Save Your Screen

Click "Save Screen" and enable "Email Updates" to get notified when new companies qualify

💰 Free Cash Flow Mastery: Beyond the Basics

Understanding when negative free cash flow is acceptable vs. when it's a red flag

Year 1: Expansion Mode

Operating Cash Flow: ₹1 Cr

Factory Expansion: ₹1.5 Cr

Free Cash Flow: -₹0.5 Cr

Verdict: Acceptable - Building future capacity

Year 2: Continued Investment

Operating Cash Flow: ₹5 Cr

Japan Machinery: ₹7 Cr

Free Cash Flow: -₹2 Cr

Verdict: Still OK - Technology upgrade

Year 3: Warning Territory

Operating Cash Flow: ₹8 Cr

Multiple Projects: ₹14 Cr

Free Cash Flow: -₹6 Cr

Verdict: Caution - Over-aggressive expansion

🎯 Professional Rule:

1-2 Years Negative FCF: Acceptable during expansion if fixed assets are increasing

3+ Years Negative FCF: Red flag - Company may be over-expanding beyond capacity

Key Check: Ensure fixed asset turnover and margins are improving alongside FCF recovery

⚡ Professional Peer Comparison: Polycab vs KEI Industries

Learn systematic decision-making when both companies pass the 10-pointer framework

🏆 Polycab India

Market Cap: ₹1,00,850 Cr

Revenue Growth: 20% (Q3 FY25)

ROE: 22.8%

Debt-to-Equity: Almost Debt Free

Current Ratio: 2.37

P/E Ratio: 45.1

🥈 KEI Industries

Market Cap: ₹28,142 Cr

Revenue Growth: 25% (Q4 FY25)

ROE: 15.4%

Debt-to-Equity: 0.16

Current Ratio: 2.14

P/E Ratio: 32.1

🎯 Decision Framework:

Polycab Advantages: Higher ROE (22.8% vs 15.4%), better current ratio, larger scale

KEI Advantages: Lower P/E (32.1 vs 45.1), higher revenue growth (25% vs 20%)

Verdict: Polycab trades at premium but delivers superior returns. KEI offers better value entry point.

📊 IT Sector Analysis: TCS vs Infosys Comparison

Sector-specific considerations beyond the 10-pointer framework

Metric	TCS (Q2 FY25)	Infosys (Q2 FY25)	Analysis
Revenue Growth (YoY)	7.6%	5.1%	Both show moderate growth in challenging IT environment
Operating Margin	24.1%	21.1%	TCS demonstrates superior operational efficiency
Constant Currency Growth	5.5%	3.3%	TCS leads in core revenue metric for IT companies
Market Cap	₹15,43,000 Cr	₹8,04,000 Cr	Both qualify as large-cap stocks comfortably
Debt Position	Net Cash Positive	Net Cash Positive	Both maintain strong balance sheets
FY25 Guidance	Cautious outlook	Raised to 3.75-4.5%	Infosys shows more confidence in recovery

🔍 IT Sector Insights

Both TCS and Infosys pass the 10-pointer framework but show different strengths:

TCS: Superior margins, larger scale, proven execution track record
Infosys: Better growth outlook, improved guidance, digital transformation focus
Sector Theme: Gradual recovery in discretionary spending, especially in BFSI segment

🎨 Quality Stock Profile: Asian Paints Case Study

What a consistent market leader looks like against our framework

⚠️ Even Quality Stocks Face Challenges

Asian Paints Q2 FY25 Performance:

Net Profit: Dropped 42% to ₹695 Cr (weak demand conditions)
Revenue: Down 5.3% to ₹8,003 Cr (weather disruptions, floods)
Market Cap: ₹2,85,000 Cr (still qualifies as large-cap)
Long-term Track Record: Consistent performer over decades

🎯 Key Learning: Cyclical vs Structural Issues

Asian Paints' recent challenges stem from cyclical factors (weather, consumer sentiment) rather than structural problems. The company maintains:

Strong brand moat and market leadership
Robust distribution network across India
Consistent dividend payments (₹4.25 interim dividend declared)
Debt-free balance sheet providing financial flexibility

Investment Insight: Quality companies facing temporary headwinds often present attractive entry opportunities for patient investors.

📝 Practical Assignments: Build Your Screening Skills

Apply the 10-pointer framework to these company pairs and practice systematic comparison

Assignment 1: Specialty Chemicals Analysis

Compare: Balaji Amines vs Alkyl Amines

Focus Areas: Both companies manufacture methyl amines and ethyl amines derivatives. Analyze which company has better fundamentals using our 10-pointer framework.

Key Metrics to Compare: ROE, ROCE, debt levels, growth rates, and cash generation efficiency

Assignment 2: Create Your Own Screen

Task: Modify the 10-pointer framework for small-cap analysis

Suggested Changes: Market Cap > ₹5,000 Cr, ROE > 12%, Revenue Growth > 15%

Goal: Discover how changing thresholds affects the number of qualifying companies

Assignment 3: Sector-Specific Modifications

Challenge: Apply framework to different sectors (Banking, FMCG, IT Services)

Learning Objective: Understand when standard criteria need industry-specific adjustments

Example: Banking stocks require different debt metrics due to their business model

🚨 Framework Limitations & Advanced Considerations

Understanding what the 10-pointer framework doesn't capture

Valuation Blindness

The framework identifies quality but ignores price. A great company at an expensive valuation can still be a poor investment. Always combine quality screening with valuation analysis.

Cyclical Company Challenges

Companies in cyclical industries (cement, steel, auto) may fail criteria during down-cycles but offer excellent opportunities. Consider business cycle positioning alongside framework results.

Growth Stage Considerations

High-growth companies may temporarily have lower profitability ratios during heavy investment phases. Evaluate the sustainability and purpose of current metrics.

Sector-Specific Adjustments

Some industries require modified criteria. Banks need different debt metrics, utilities have different growth patterns, and tech companies have unique cash flow characteristics.

⚠️ Important Reminder

The 10-pointer framework is your starting point, not your ending point. Use it to create a shortlist of quality companies, then conduct deeper fundamental analysis, valuation assessment, and management quality evaluation before making investment decisions.

🎯 Your Systematic Screening Action Plan

You now possess the complete framework used by professional investors to separate quality stocks from market noise. Here's your next steps:

Practice the Demo: Go to Screener.in and run the exact query we showed you
Analyze the 29 Results: Research each company that passes to understand their businesses
Complete Homework Assignments: Build your comparison skills with Polycab vs KEI and others
Adapt for Sectors: Learn when to modify criteria for banking, IT, and other specialized industries
Combine with Valuation: Never buy quality at any price - always assess valuation context

🔗 Building Your Complete Investment Process

Integrating systematic screening with comprehensive analysis

✅ Your Complete Investment Workflow

Screen for Quality: Use 10-pointer framework to identify potential candidates
Sector Analysis: Understand industry dynamics, competitive positioning, and growth drivers
Company Deep Dive: Analyze business model, management quality, and competitive advantages
Valuation Assessment: Determine if the quality comes at a reasonable price
Risk Evaluation: Assess potential downsides and scenario planning
Portfolio Integration: Consider position sizing and overall portfolio balance

🚀 Advanced Screening Applications

Once you master the basic framework, explore these advanced techniques:

Multi-Factor Models: Combine quality, value, and momentum factors
Sector Rotation Screens: Identify leaders in favorable industry cycles
Dividend Aristocrat Filters: Focus on consistent dividend-paying companies
Small-Cap Quality Screens: Find emerging quality companies before they become large-caps

Remember: Systematic screening is the foundation of successful investing. It helps you avoid emotional decisions, maintain discipline, and focus on companies with sustainable competitive advantages. Master this framework, and you'll join the minority of investors who consistently outperform the market through systematic, evidence-based investment decisions.