Introduction: Why Screeners Matter in NEPSE

Nepal’s stock market is noisy. Rumors, hype-driven IPOs, and short-term speculation often push investors into emotional decisions. In such an environment, a stock screener becomes a powerful tool.

Instead of guessing which stocks to buy, investors can use screeners to filter companies based on valuation, dividends, growth, sector performance, and liquidity. This brings discipline to investing and reduces the risk of falling into pump-and-dump traps.

Here’s a step-by-step guide on how to use a stock screener in NEPSE.

Step 1: Set Valuation Filters (P/E and P/B Ratios)

Valuation is the foundation of stock analysis. A good screener lets you filter by:

Price-to-Earnings (P/E) Ratio
- Low P/E (<15): Undervalued stocks worth deeper analysis.
- High P/E (>40): Likely overvalued, unless backed by extraordinary growth.
Price-to-Book (P/B) Ratio
- P/B < 1: Stock trades below asset value, often overlooked by the market.
- P/B > 3: Signals hype or speculative trading.

Investor Tip: Compare P/E and P/B ratios with sector averages. A bank at P/E 12 might be cheap, but a hydro at the same multiple could be fairly valued.

Step 2: Add Dividend Yield Criteria

Dividends are a crucial income cushion in volatile markets like NEPSE.

Dividend Yield Formula:
Dividend Yield=Dividend per SharePrice per Share×100\text{Dividend Yield} = \frac{\text{Dividend per Share}}{\text{Price per Share}} \times 100Dividend Yield=Price per ShareDividend per Share×100
High Yield (>6%): Attractive, but check if sustainable.
Low Yield (<2%): Risky unless the stock has strong growth prospects.

A screener can highlight dividend-rich banks and insurers that consistently reward investors, while excluding speculative stocks with poor payout history.

Step 3: Check Liquidity and Trading Volume

A stock may look cheap, but if you can’t sell it when needed, it’s a trap.

High Liquidity: Commercial banks and large hydros — easy to enter and exit.
Low Liquidity: Smaller MFIs and development banks — risky during downturns.

Investor Tip: Use the screener to filter stocks with average daily turnover above a set threshold. This ensures tradability.

Step 4: Narrow by Sector

Different sectors behave differently under various economic conditions:

Commercial Banks: Dividend plays, sensitive to NRB policies.
Hydropower: IPO hype + long-term export growth potential.
Insurance: Dividend-friendly but exposed to claims and regulation.
Microfinance (MFIs): High-growth but volatile and heavily regulated.
Tourism: Cyclical, linked to global travel trends.

A screener allows you to focus on sectors that fit your strategy — defensive (banks, insurers) vs. growth (hydros, MFIs).

Step 5: Add Growth and Earnings Filters

Ultimately, earnings drive stock prices.

Filter for EPS Growth over 1Y or 3Y.
Look at Revenue Growth to see if companies are expanding.
Compare growth with valuations — a low P/E stock with rising earnings is a true gem.

Investor Tip: Avoid companies with flat or negative earnings growth, no matter how cheap they look.

Step 6: Use Broker Concentration Data

Unique to NEPSE, broker concentration is a critical filter.

If 1–2 brokers dominate >60% of trades in a stock → red flag for manipulation.
Healthy stocks have broad participation from multiple brokers.

Some screeners (like Nepalytix) integrate this feature, helping investors avoid pump-and-dump traps.

Step 7: Build and Track a Shortlist

Once filters are applied, the screener will output a list of potential candidates. From here:

Create a Watchlist: Track 10–15 stocks that fit your filters.
Monitor Regularly: Update filters monthly to catch changes.
Refine: Drop stocks that fail fundamentals, keep those improving.

This process helps investors focus on quality, not quantity.

Example: Screening for Dividend Value Stocks

Let’s say you want stable dividend stocks in NEPSE. You set filters as:

P/E Ratio: <15
Dividend Yield: >6%
Liquidity: Average daily turnover above NPR 5 million
Sector: Commercial Banks and Insurance

Result: A shortlist of large banks and insurers with strong dividends, low valuation, and stable liquidity. This gives you safer investment opportunities.

Benefits of Using a Screener

Saves Time: Cuts through hundreds of stocks quickly.
Reduces Hype Bias: Focuses on numbers, not rumors.
Improves Discipline: Encourages data-driven decisions.
Reveals Hidden Gems: Finds undervalued stocks overlooked by retail traders.
Prevents Traps: Filters out illiquid or manipulated stocks.

Conclusion: Screen Before You Buy

In NEPSE, where retail speculation dominates, stock screeners are a game-changer. By filtering on valuation, dividends, liquidity, sector trends, earnings growth, and broker data, investors can make smarter, more disciplined decisions.

Bottom line: Don’t let noise drive your investments. Use a screener, build a shortlist, and invest with clarity. In a market like NEPSE, discipline is the difference between chasing bubbles and building wealth.