Celestica Inc (NYSE:CLS) Emerges as a Top CAN SLIM Growth Stock Candidate

Investors using the CAN SLIM methodology, a growth investing system created by William O'Neil, are always searching for companies showing notable earnings growth, good price performance, and institutional interest. The method uses fundamental analysis to find high-quality growth stocks with technical analysis to find good entry points, working on the idea that the stocks of companies with good earnings and sales acceleration will be noticed and pushed higher by the market. A recent screen using this method has found Celestica Inc (NYSE:CLS) as a company deserving more attention from growth-focused investors.

Strong Quarterly Earnings and Sales Growth

The "C" in CAN SLIM represents Current Quarterly Earnings, requiring large and preferably accelerating growth in both earnings per share (EPS) and sales. This is a fundamental part of the system, as it shows a company's present operational momentum.

• EPS Growth (Q2Q): 51.92%
• Sales Growth (Q2Q): 27.79%

Celestica's numbers here are notable. Its EPS growth of over 51% is much higher than the usual CAN SLIM minimum of 18-20%, showing significant profit expansion. Similarly, its sales growth of almost 28% is above the screen's need for 25%, indicating good and increasing demand for its global supply chain solutions.

Impressive Annual Earnings and Profitability

The "A" in the acronym calls for good Annual Earnings Increases over several years, making sure the company's success is not a short-term event. It also focuses on high profitability, often measured by Return on Equity (ROE).

• 3-Year EPS CAGR: 44.10%
• Return on Equity (ROE): 35.33%

Celestica shows very good performance on these yearly metrics. A 3-year EPS compound annual growth rate of over 44% is much higher than the 25% minimum, displaying sustained and strong earnings power. Also, an ROE of 35.33% is excellent, placing it with the top performers in its industry and showing very efficient use of shareholder equity.

Market Leadership and Institutional Sponsorship

The "L" and "I" criteria concentrate on market leadership and institutional sponsorship. CAN SLIM investors look for stocks that are price performance leaders and are being bought by institutional investors, as this buying activity can support further price increases.

• Relative Strength (CRS): 98.19
• Institutional Ownership: 75.85%

Celestica's relative strength of 98.19 means it has performed better than 98% of all stocks in the market over the last year, a clear indicator of market leadership. Its institutional ownership of 75.85% is under the 85% level used in the screen, which is a good sign as it implies there is still capacity for more institutions to find and purchase the stock, creating possible future demand.

Financial Health and Valuation Context

A complete view of Celestica, based on its fundamental analysis report, shows a company with very good health and profitability scores within its industry. It has a good balance sheet with an acceptable debt-to-equity ratio of 0.37, which is much lower than the screen's maximum of 2. While its P/E ratio seems high initially, it is necessary to see this next to its exceptional growth rates and industry-leading profitability. From a technical standpoint, the technical analysis report gives the stock a high score of 9 out of 10, noting its good long-term uptrend and exceptional yearly performance. While the stock has seen some recent consolidation, its overall technical situation remains sound.

A Candidate for Further Research

Celestica Inc presents a notable profile for investors using the CAN SLIM framework. It shows very strong quarterly and annual earnings growth, high profitability, clear market leadership through its high relative strength, and a healthy amount of institutional interest. Its good fundamental health provides a stable base for continued growth. While the present market shows a mixed situation with a negative long-term trend for the S&P 500, CAN SLIM focuses on the importance of investing in good individual stocks, and CLS has shown a capacity to perform better than the wider market.

For investors interested in finding other companies that match this strict growth model, you can look at the full and updated list of results from our O'Neill CANSLIM High Growth screen.

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Disclaimer: This article is for informational purposes only and does not constitute investment advice of any kind. All data and metrics referenced are based on publicly available information and are subject to change. Investors should conduct their own due diligence and consult with a qualified financial advisor before making any investment decisions.