Investors looking to find high-growth market leaders frequently use established methods to sort the wide array of stocks. One of the most lasting systems is the CAN SLIM method, made well-known by William O'Neil. This method mixes fundamental and technical study to find companies showing solid earnings growth, excellent relative price performance, and institutional backing, all while the general market trend is positive. The aim is to locate stocks that are both fundamentally healthy and are also being noticed and bought by the market.
A recent filter using main CAN SLIM rules has identified CECO ENVIRONMENTAL CORP (NASDAQ:CECO) as a possible candidate. The Texas-based company offers engineered technology solutions for industrial air, water, and energy transition markets around the world. We will look at how CECO matches the main parts of the CAN SLIM method.
Matching the CAN SLIM Fundamentals
The "C" and "A" in CAN SLIM concentrate on current and yearly earnings strength, which are vital for spotting true growth momentum. CECO shows solid figures here:
- Current Quarterly Growth: The company reported year-over-year earnings per share (EPS) growth of 85.7% and sales growth of 45.8% for its latest quarter. This greatly passes the CAN SLIM standard of 20-25% growth, showing very strong recent business momentum.
- Annual Earnings Increases: Over the last three years, CECO has recorded an EPS compound annual growth rate (CAGR) of about 35.4%, exceeding the method's usual 25% minimum. This implies the recent strength is part of a longer-term profitable pattern.
- Return on Equity (ROE): With an ROE of 16.8%, CECO shows effective use of shareholder capital, well above the 10% level often used in CAN SLIM filters to confirm quality profitability.
The "S" rule, about supply and demand, includes a focus on a sound balance sheet. CECO's debt-to-equity ratio of 0.71 is under the filter's limit of 2, showing a reasonable amount of debt that does not strain the company's equity structure.
Technical Leadership and Institutional Sponsorship
The "L" and "I" parts move the focus to market activity and investor makeup. CAN SLIM states that the best fundamental stories are verified by price movement and professional investor interest.
- Market Leader Position: Maybe the most notable technical match is CECO's outstanding relative strength (RS) rating of 98.12. This means the stock's price performance has beaten nearly 98% of the market over the past year, a key sign of the market leadership the method looks for. The stock is also trading near its highest prices in the past year, another positive technical sign within the CAN SLIM method.
- Institutional Sponsorship: Institutional ownership is at 83.0%, which is below the 85% maximum used in the filter. This is seen as positive because it indicates notable institutional interest while allowing space for more institutional purchases, which can give added demand and price support.
High-Level Analysis: Growth vs. Valuation
A look at CECO's fundamental analysis report points to a clear story: outstanding growth combined with a high valuation. The report gives a high mark for growth, noting very strong past revenue gains and even stronger earnings growth forecasts for the next years. However, this comes with a valuation mark of only 1 out of 10, as the stock trades at high earnings multiples. This is a common situation for high-growth CAN SLIM candidates, investors must accept a high price for expected future growth.
In contrast, the technical analysis report gives a top mark of 10 out of 10. It confirms both short-term and long-term trends are good and states the stock is a leading performer in its industry. The main warning from a technical entry view is that the recent fast price rise may justify waiting for a time of settling before starting a new position.
The "M" Factor: Market Direction
The last part of CAN SLIM is market direction, which suggests investing in line with the wider market trend. At this time, both the short-term and long-term trends for the S&P 500 are positive. This supportive market condition fits with the method's rule to look for leading stocks during clear market rises, giving a positive setting for a stock like CECO.
Finding More CAN SLIM Candidates
CECO Environmental Corp offers a strong example of a stock fitting several strict CAN SLIM rules, displaying very high quarterly growth, solid long-term earnings growth, top-level relative strength, and institutional interest in a positive market. Investors wanting to filter for other companies that match this growth-oriented profile can use the pre-configured CAN SLIM screener used in this study.
Disclaimer: This article is for information only and is not investment advice, a suggestion, or an offer to buy or sell any security. The study is based on data and methods thought to be dependable, but its correctness is not assured. Investors should do their own complete research and think about their personal money situation and risk comfort before making any investment choices.
