For investors looking for a systematic way to find high-growth market leaders, the CAN SLIM method, created by William O'Neil, provides a disciplined structure. This approach joins careful fundamental study with important technical signs to find stocks with solid earnings momentum, institutional support, and better relative strength, all while noting the significance of the general market trend. The aim is to locate companies not only with strong financials, but with the market acceptance and technical position to indicate continued upward movement.
A recent filter using this method has identified The Vita Coco Company, Inc. (NASDAQ:COCO) as a candidate for more detailed review. The coconut water maker seems to fit several central ideas of the CAN SLIM philosophy.
Matching the CAN SLIM Requirements
A look at how COCO measures against specific CAN SLIM points shows a notable profile for growth-focused investors:
- Current Quarterly Earnings & Sales (C): The method requires large or speeding up quarterly growth. COCO states a quarterly earnings per share (EPS) growth of 25% and sales growth of more than 37% against the same quarter last year, easily passing common minimum levels.
- Annual Earnings Increases (A): A record of solid annual growth is key. COCO displays a strong 3-year EPS compound annual growth rate (CAGR) of about 39%, showing steady and notable earnings growth.
- New Products, New Highs (N): While a matter of opinion, Vita Coco has become a frontrunner in the increasing functional drink category. On the technical side, the stock is changing hands close to its 52-week high, a good signal according to CAN SLIM which sees new highs as a sign of strength.
- Supply, Demand, and Financial Health (S): The company has a very solid balance sheet with a debt-to-equity ratio of 0.0, meaning no debt. This financial strength offers stability and options.
- Leader or Laggard (L): This is a central part of the method. COCO shows very good relative strength, doing better than 91% of all stocks in the past year. It is a definite leader.
- Institutional Sponsorship (I): CAN SLIM searches for increasing institutional attention. With institutional ownership near 84%, COCO has notable support while still allowing for more institutional buying.
- Market Direction (M): The method suggests investing in line with the wider market. At this time, both the long-term and short-term trends for the S&P 500 are good, creating a supportive setting for CAN SLIM picks.
Fundamental and Technical Overview
A check of COCO's separate reports gives more background for its CAN SLIM attraction.
From a fundamental view, the company shows a varied but growth-oriented picture. It rates well on financial health and profit, with high marks for metrics like a Return on Equity (ROE) of 21.36% and very good liquidity measures. Growth is a clear positive, with solid past and predicted future increases in both revenue and earnings. The main note is on price, where measures like its P/E ratio are seen as high compared to both the industry and wider market, a typical trait of high-growth firms that CAN SLIM investors frequently tolerate for notable momentum. You can view the complete fundamental analysis report for COCO here.
The technical analysis is very strong, receiving a top rating. The long and short-term trends are positive, and the stock is holding near its highs after a large upward move, possibly making a constructive shape. The high relative strength score verifies its leading status. This technical power gives the market confirmation the CAN SLIM method needs to go with good fundamentals. The complete technical analysis for COCO is available here.
Conclusion
The Vita Coco Company offers a notable example for the CAN SLIM method. It shows the notable mix the approach seeks: large quarterly and annual earnings growth, leadership in its market, excellent financial health, solid institutional ownership, and importantly, better price action verified by very good technical ratings. While its price requires attention, its fit with the growth and momentum needs of CAN SLIM is evident.
For investors wanting to use this method to find other possible leaders, the set CAN SLIM filter used in this review is ready to use. You can see more screening outcomes and change the points to fit your own plan here.
Disclaimer: This article is for information only and is not financial advice, an endorsement, or a suggestion to buy, sell, or hold any security. Investing has risks, including the possible loss of the original amount invested. Always do your own complete research and think about your personal financial position and risk comfort before making any investment choices.
