By knowing the candy type the family is known. When it knows the CP and level it can (usually) pinpoint the exact species it is. Another way could be to get the "overall color" (like if you had pixelated the 'mon to one pixel) to determine it.
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It has to be by candy. Since it recognized my Entei when it was one of those glowing balls (When the pokemon is loading in.)
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Good point, because sometimes it can't recognize a low CP evolution!
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I wonder why they can't recognize a screenshot :/
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It can, sometimes. I swear I successfully recognized some screenshots from this forum, but normally yes, screenshot don't work for some reason.