Entering screenplays in contests and film festivals is an excellent way to gauge how your script measures up against other screenplays.
A placement as a quarterfinalist or semifinalist means you are probably on the right track. But keep in mind, screenplay readers are a fickle bunch and not everyone likes the same thing or for the same reasons. The ultimate test is whether you can get a favorable read from a manager or an agent or producers.
If you do enter contests, always do your due diligence by reading the terms and conditions of any contest to protect your screenplay from unscrupulous competitions. And watch your budget. Screenplay contest entry fees can get expensive.