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Written by Matthew Cerminaro on January 17, 2021
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How To Find The Cheapest Stocks On Robinhood

If you want to be a successful investor, finding bargains in the stock market should be your main focus. We hear it time and time again, "buy low and sell high." Although this principle is easy to understand in concept, buying a cheap stock and selling it when it becomes expensive can take lots of time to master.

Most online brokers offer tools to investors to help them succeed in their investing journey. One of the main tools brokers, including Robinhood, offer is a stock screening feature. By scanning for stocks using a screening tool, investors can set their own criteria for what makes a stock considered "cheap", and use technology to find companies with attractive valuations. In this article, you'll learn about the ways to screen for investment opportunities on Robinhood.

Summary: Finding Cheap Stocks on Robinhood

  • Robinhood's screening tool offers a fast way to find "cheap" stocks on Robinhood 
  • Screen for stocks based on several features including Price/ Earnings multiple, market capitalization, price, analyst ratings, and more 
  • Stock screeners are free if you have a Robinhood account 
  • Robinhood stock screens can only be accessed through a web browser 
  • Once you find a cheap stock, you can invest in it completely free through Robinhood's $0 commission trading platform 
  • Easy to use stock screener that is extremely beginner-friendly 

Robinhood's Screening Tool 

To use Robinhood's screening tool, first, log into your account on a web browser. Next, click on "Popular collections" and select the option that says "Show more." Here, you can select the sector you are interested in, industry, and set certain criteria for the stocks you desire. The first most important criterion is price relative to value. 

Price to Earnings Ratio

The price to earnings ratio is the price you are paying in dollars per dollar of earnings. For example, a company whose stock trades at $100 per share and earns a profit of $5 per share has a P/E ratio of 20. This means you are paying $20 per dollar of earnings the company produces. The price-earnings ratio can be used as a metric to compare valuations across companies, sectors, or regions.

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Market Capitalization 

You can also sort Robinhood's wide range of securities by market cap. Market capitalization is the total amount of company shares outstanding multiplied by its share price. Some investors believe investing in larger-cap stocks are typically more liquid and thus a safer investment. Remember to do your research and have your own opinion before going into any investment, regardless of the price. Just because a stock has a high market cap and trading at a low price doesn't mean it's automatically a great investment.

Analyst Insights

This is one of my personal favorite features of Robinhood's stock screening tool. Instead of searching based on quantitative measures underlying a stock, instead, you can sort by analyst ratings. If you want to find a cheap stock (even a penny stock) with a high market cap and 'buy' ratings by analysts, simply input all of these measures into the screening tool and let it do the work for you. 

Popularity 

Another fantastic aspect of Robinhood's stock screening tool is the "popularity" feature. Scanning stocks based on their popularity is a very niche aspect of Robinhood's screening tool that sets it apart from others. You can learn a lot when it comes to investing by analyzing what other people are doing. This feature offers just that. Find the most popular stocks based on other Robinhood user's purchases and get some ideas from others! 

Robinhood Screening Tool Pros 

  • Opportunity to scan for cheapest stocks offered on Robinhood 
  • Price to Earnings and Market capitalization search capabilities 
  • Sort stocks based on a certain price criterion (i.e. only penny stocks
  • Completely free to use for Robinhood users 
  • Sort by analyst insights and rankings 
  • Very easy to use and easily accessible on the Robinhood website (for those who have a Robinhood account) 

Robinhood Screening Tool Cons 

  • Can only be accessed through a web browser, can't be accessed on mobile app 
  • Unable to search based on some valuation metrics, for example, price to book ratio 
  • You need to have an open account with Robinhood to access its screener 
  • A relatively new feature, reports that the screener has been 'buggy' at times 

What Makes a Stock Cheap? 

There are two questions that investors should ask when determining if there is a buying opportunity for a stock. What is its price and what is its intrinsic value? As said by the world's best value investor Warren Buffett said, price is what you pay and value's what you get. A company's underlying value can be determined by the projections of its free cash flows added up into perpetuity discounted back to a fair value. This fair value is called a stock's intrinsic value. In other words, what the stock is worth given its future business practices.

Importance Of Price 

The second aspect of fundamental investing is finding companies that are priced below their intrinsic value. Price is extremely important when investing and another reason why Robinhood users find its screening tool so useful (but we'll get to that later).

When a stock's price falls below its intrinsic value, it signals a buying opportunity. This can happen for several reasons. A bad earnings report that scares investors, a lawsuit for a company, antitrust regulation, or something as simple as a board member leaving the company.

Oftentimes, investors negatively react to these occurrences and can cause volatility in share prices. Your job as an investor when these instances occur is to determine whether the stock is selling off below its intrinsic value, or the share price decreasing is warranted. If it is not, that may be an investment opportunity.

So now that you understand the fundamentals of value investing and why share price matters, let's dive into the screening tools you can use to make great investments on Robinhood!  

What is Robinhood? 

Robinhood is an online broker that offers stock trading services to its users and extremely competitive rates. Traditional online brokers charge commissions for stock and ETF purchases on through their services, but not Robinhood. Instead, Robinhood's main focus is on providing $0 commission fees to its users, enabling greater access to the financial markets from all financial demographics. Whether you are small or large, Robinhood's cheap services attract the likes of all investors. 

$0 Commissions 

As mentioned, $0 commissions are the cornerstone service of Robinhood. If you want to buy or sell a stock or ETF, you will only pay the price of the security. This is important because your cost of investing goes down drastically! Not only does Robinhood offer this cheap way to invest, but also has a tool to help you find the lowest valued stocks. Before we delve into this feature, let's first determine what exactly makes a stock cheap. 

The Final Verdict: Robinhood Screening Tool 

Overall, Robinhood's stock screener achieves exactly what it sets out to do. Screen for a segment of stocks that is determined by your personal criterion. You can find extremely cheap penny stocks easily by setting your share price criterion to between $0.1 and $5. Or, if you are more interested in higher-priced stocks, you can set that criterion as well. It all comes down to your personal preference!

I can say that in my time utilizing this feature on Robinhood's website, I have been able to find exactly what I needed. Remember, however, that this feature can only be accessed through a web browser, so if you are a mobile app user only, you will not be able to use this feature. 

At the end of the day, the feature's usefulness can only be determined by what you are looking for. If you are looking for more in-depth screening metrics such as price to book ratios and price to cash flow rations, Robinhood's screener might not be right for you. Instead, you can check out the long list of free screeners that are offered online! But, if you are simply looking for cheap stocks to invest in on Robinhood, this screener will get the job done. 

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how to find the cheapest stocks on robinhood
Article written by Matthew Cerminaro
Matt is currently attending Union College pursuing a Bachelor of Arts in Economics. He participates in the student investment fund and is a member of the Union College football team. Matt runs his own personal finance Instagram page and market-related blog where he writes about economics and general wealth accumulation tips.

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