There are 331 equities listed on the Dhaka Stock Exchange. The audited P/E ratio across all of them is 18.68 — but limit that to profitable companies only and it drops to 9.60. That gap exists because dozens of loss-making, thinly traded, or regulatory-troubled stocks are dragging the average into meaninglessness. Most investors never filter them out. They scroll the trading board, chase volume spikes, and wonder why their portfolio underperforms an index they could have bought passively.
Screening is the fix. Not stock-picking — screening. The distinction matters. Picking implies you are choosing winners. Screening means you are eliminating losers, systematically, until the handful of stocks worth your research time are the only ones left on the list. Here is a four-layer framework that does exactly that for the DSE.
Layer One: Start With the Category — Not the Price
Before you look at a single ratio, filter by DSE stock category. The exchange classifies every listed company into A, B, G, N, or Z based on AGM compliance and dividend history. This classification is not cosmetic. It determines settlement cycles, signals governance quality, and immediately separates companies that return capital to shareholders from those that cannot.
A-category stocks have held their AGM on schedule and declared at least 10% dividend in the previous calendar year. B-category companies held their AGM but missed the dividend threshold. Z-category means the company failed to hold an AGM, declared no dividend, has been non-operational for six months or more, or carries accumulated losses exceeding paid-up capital. Z-category also settles on T+3 instead of T+2 — an extra day of settlement risk that most retail investors do not price in.
Start with A-category. If you want to cast a wider net, include B-category stocks where the dividend shortfall has a cyclical explanation you can verify. Exclude Z-category entirely unless you are speculating with money you can afford to lose. This single filter eliminates a significant portion of the listed universe before you open a screener tool.
But category alone does not tell you whether a stock is tradeable. A perfectly compliant A-category company with no buyers is still a trap.
Layer Two: The Liquidity Floor
Set a minimum average daily turnover of Tk 5–10 lakh over the trailing 30 days. Below that threshold, three problems compound. Bid-ask spreads widen, making your effective purchase price worse than the screen shows. Exit becomes uncertain — you may own a fundamentally sound stock that takes days to sell without moving the price against yourself. And thin liquidity increases vulnerability to price manipulation, where a few coordinated orders can move a stock 5% on negligible volume.
Tools like Stocksupporter and AmarStock let you sort by trading volume and turnover. Use them. A stock that passes every fundamental test but fails the liquidity test is not a candidate — it is a research project you cannot act on efficiently.
After category and liquidity, you are working with a much shorter list. Now the ratios matter.
Layer Three: Five Ratios That Each Eliminate a Different Problem
Each ratio in this layer screens out a specific type of low-quality stock. Apply them together — no single ratio is sufficient alone.
P/E ratio between 5 and 20 for profitable companies. The DSE market-wide audited P/E for profitable companies is 9.60, with a forward P/E of 9.65. Anything below 5 may signal distress rather than value. Above 20 requires a growth story strong enough to justify the premium — and most DSE companies do not have one.
P/B ratio between 0.5 and 3.0. Many DSE stocks trade below book value, particularly in banking and financials. A P/B below 0.5 is not automatically a bargain — it often reflects genuine asset quality concerns that the NAV per share alone will not reveal. Above 3.0, you need clear evidence that intangible value justifies the premium over book.
ROE above 10% for at least three consecutive years. A single year of strong returns can be an accounting artifact. Three years of 10%+ ROE demonstrates that management consistently converts shareholder capital into profit. Above 15% is genuinely strong on the DSE.
Debt-to-equity ratio below 1.0 for non-financial companies. Capital-intensive sectors like textiles can tolerate up to 2.0, but anything higher means the company’s equity cushion is thin relative to its obligations. Exclude banks and NBFIs from this filter — their business model is leverage, and NPL ratio is a better risk measure for financials.
EPS growth positive for at least three years, with year-over-year growth above 10%. Volatile earnings per share is common on the DSE due to cyclical businesses and currency exposure. Consistent growth separates companies building real value from those riding a single good quarter.
A stock that passes all five filters has demonstrated profitability, reasonable valuation, capital efficiency, manageable leverage, and earnings momentum. That is a short list — typically 10 to 15 names out of 331.
Layer Four: The Red Flag Sweep
The temptation after Layer Three is to start buying. Resist it. The final screen is qualitative, and it catches problems that ratios miss.
Check for unusual changes in director shareholding — large insider sales during price strength are a signal that the people who know the company best are reducing exposure. Look for declining NAV per share over consecutive quarters, which can indicate asset write-downs or hidden losses. Verify that operating cash flow is positive — a company can report earnings while burning cash if receivables are ballooning or inventory is accumulating. And check for recent BSEC regulatory actions, which often precede further deterioration. Our red flags guide covers the full checklist.
What survives all four layers is not a buy list. It is a watchlist — the 10 to 15 stocks that have earned the right to your deeper research time. Read their annual reports. Model their earnings. Understand their sector dynamics. Then decide whether they belong in your portfolio.
Screening does not guarantee returns. But it guarantees that you are not wasting your limited research hours on the 300 stocks that were never worth investigating in the first place. In a market where the average P/E swings from 9.60 to 18.68 depending on whether you include the deadweight, eliminating that deadweight is the first edge you can give yourself.
Disclaimer: This article is for educational purposes only and does not constitute investment advice. Stock screening is one step in the research process — always conduct thorough due diligence and consider consulting a licensed financial advisor before making investment decisions.