For investors looking for a systematic way to find high-growth market leaders, the CAN SLIM method, created by William O'Neil, is a foundational strategy. It joins careful fundamental study with important technical signs to find stocks with solid earnings momentum, institutional support, and better price performance, preferably when market conditions are good. The system’s name lists its main parts: Current quarterly earnings speed, Annual earnings increases, New products or price highs, Supply and demand, Leadership position, Institutional ownership, and the general Market trend.
A recent filter using this method has identified Celestica Inc (NYSE:CLS) as a candidate for more review. The worldwide supplier of supply chain solutions seems to fit a number of the strategy's numerical filters, indicating a condition of sound financial condition and market momentum.
Fit with CAN SLIM Fundamentals
A close look at the fundamental rules shows why CLS meets the initial filter. The CAN SLIM system values strong and speeding earnings, and Celestica meets this point clearly.
- Current Quarterly Earnings & Sales (The "C"): The system searches for recent quarterly earnings per share (EPS) increase of at least 20-25%. Celestica goes beyond this, with EPS increase of 70.3% and sales increase of 43.6% from the same quarter last year. This strong speed is a main sign for CAN SLIM investors.
- Annual Earnings Gains (The "A"): More than one quarter, the strategy requires a multi-year history of growth. CLS displays a 3-year EPS compound annual growth rate (CAGR) of 46.9%, above the common 25-50% level. Also, its Return on Equity (ROE) of 37.6% shows very efficient use of shareholder money, passing the system's want for a minimum ROE of 10%.
- Supply and Demand & Institutional Sponsorship (The "S" & "I"): CAN SLIM prefers companies with acceptable debt levels and rising institutional attention. Celestica's debt-to-equity ratio of 0.34 is low and is under the filter's limit of 2.0. At the same time, institutional ownership is 73.0%, which is under the 85% limit often used to prevent overly common trades, leaving possible space for more institutional buying.
A check of the full fundamental analysis report gives CLS a score of 7 out of 10, stating "excellent" condition and profit. The summary says the company is "very profitable, without any liquidity or solvency issues" and is "growing strongly," making it relevant for growth and quality investing.
Technical and Market Leadership View
The "N" and "L" in CAN SLIM center on new price highs, correct chart patterns, and market leadership, areas where technical study is key. This is where the strategy brings together price movement to verify fundamental strength.
- Leader or Laggard (The "L"): A main rule is investing in market leaders, not laggards. This is measured using relative strength (RS), which compares a stock's performance to the wider market. CLS has a high relative strength of 98.0, meaning it has done better than 98% of all stocks over the last year. This clear leader position is a required mark for the method.
- New Highs & Chart Setup (The "N"): The strategy looks for stocks moving out of good consolidation shapes ("bases") to new highs. While CLS is trading under its absolute 52-week high, the technical analysis report states it is "currently trading in the upper part of its 52 week range" and shows "a decent setup pattern" with prices consolidating near a resistance level. The report points out a main resistance area just above the present price, indicating a possible breakout point that CAN SLIM investors frequently monitor.
The technical report gives a neutral score of 6, recognizing strong long-term performance but varied short-term signs. For a CAN SLIM investor, the outstanding relative strength is the main technical part, while the forming chart setup would guide the exact timing of any possible entry.
Summary and Investor Points
Celestica Inc shows a strong argument for investors using the CAN SLIM structure. It displays the fast quarterly and annual earnings growth the system aims to identify, along with good profit measures and a solid balance sheet. Its high relative strength of 98 verifies its position as a market leader, a fixed part of the strategy.
However, two key parts of CAN SLIM need outside evaluation. First, the "M" for Market Trend reminds investors that even the best stocks can have difficulty in a falling overall market. Second, the "N" for New Products/Management needs a qualitative review of the company's new offerings and market place within its field (Electronic Equipment, Instruments & Components), which investors must study on their own.
For those wanting to see other stocks that meet similar strict growth and momentum rules, you can see the full O'Neill CANSLIM High Growth screen.
Disclaimer: This article is for information only and is not financial advice, a suggestion, or an offer to buy or sell any securities. The CAN SLIM method involves risk, and past results do not guarantee future outcomes. Investors should do their own complete research and think about their personal financial situation and risk comfort before making any investment choices.