The CAN SLIM investment system, created by William O'Neil, is a disciplined method for finding high-growth market leaders. It joins careful fundamental study with important technical signs to locate stocks with solid earnings momentum, institutional support, and good market placement. The method looks for companies showing large current and yearly earnings gains, high relative strength, and good financial condition, all while the general market trend is positive. This organized filter tries to isolate true market leaders from the wider group of stocks.
Futu Holdings Ltd-ADR (NASDAQ:FUTU) appears as a notable candidate from a CAN SLIM-based screen. As a digital brokerage platform mainly serving the Chinese market, its recent results and financial numbers match the strategy's main principles closely.
Meeting the CAN SLIM Criteria
A look at Futu's main numbers shows a good match with the quantitative filters of the CAN SLIM system:
- Current Quarterly Earnings & Sales (C): The system requires large or speeding quarterly growth. Futu states a very high 134.2% year-over-year earnings per share (EPS) gain and an 86.3% rise in revenue for the latest quarter, well above the common minimum levels of 20-25%. This fast growth is a main sign for CAN SLIM investors.
- Annual Earnings Increases (A): CAN SLIM searches for a record of large growth. Futu's three-year EPS compound annual growth rate (CAGR) is about 28.8%, safely over the 25% mark. Also, its Return on Equity (ROE) of 26.9% is much higher than the 10% minimum, showing very efficient use of shareholder money.
- Leader vs. Laggard (L): A key part of the strategy is to invest in market leaders, not laggards. This is measured by relative strength, which compares a stock's price action to the wider market. Futu has a relative strength score of 94.5, meaning it has done better than almost 95% of all stocks. This puts it clearly in the leader group CAN SLIM wants.
- Supply and Demand / Financial Health (S): The system prefers companies with acceptable debt. Futu's debt-to-equity ratio of 0.36 is much lower than the screen's filter of 2, showing a careful balance sheet with enough equity financing compared to debt.
- Institutional Sponsorship (I): While CAN SLIM needs institutional ownership, it cautions against too much ownership that could reduce future buying. Futu's institutional ownership of about 53% is in an acceptable area, indicating notice by professional investors without being too heavily owned by them.
Fundamental and Technical Overview
The given fundamental analysis report for Futu gives a firm rating of 6 out of 10, noting a varied but hopeful profile. The company's profitability is very high, with leading industry margins and returns on capital. Its growth record is strong, showing three-figure EPS growth last year and good forward estimates. The main point of care is in its financial health, which, while better, shows some softness in certain solvency measures. Price seems fair compared to its high growth speed and the wider market.
From a technical view, the technical analysis report is particularly firm, giving a rating of 9 out of 10. The stock is in a confirmed upward trend on both short and long time periods, which fits well with the "M" (Market Direction) part of CAN SLIM, especially with the present positive trend of the S&P 500. The high relative strength score is repeated, and the stock trades near the high part of its 52-week range with acceptable trading volume. The report does state, however, that the recent price rise may suggest care, looking for a better consolidation or drop to a major support level before a possible good entry point appears, a thought that matches CAN SLIM's focus on correct chart patterns.
A Template for Further Research
Futu Holdings offers an example of how the CAN SLIM filters can identify companies with fast growth, leading market results, and good financial foundations. Its match with the strategy's quantitative standards makes it a stock deserving of more careful study for growth-focused investors.
For investors wanting to find other companies that pass similar strict growth and momentum screens, the ready-made O'Neill CANSLIM High Growth screen gives a changing beginning point for more study.
Disclaimer: This article is for information only and is not financial advice, an endorsement, or a suggestion to buy, sell, or hold any security. The CAN SLIM method and any related screens are tools for study, not assurances of future results. Investing has risk, including the possible loss of original money. Always do your own complete study and think about your personal financial position and risk comfort before making any investment choices.
