The CAN SLIM investment system, created by William O'Neil, is a structured method for finding high-growth market leaders. It joins strict fundamental analysis, which looks for solid and increasing earnings and sales, with important technical signs such as relative strength and market timing. The aim is to locate companies with excellent growth traits that are also being noted and bought by large investors, preferably while the overall market is rising. This method tries to identify stocks in the beginning or middle parts of a large price increase.
A recent filter using the main CAN SLIM rules has identified GENERAL ELECTRIC (NYSE:GE), specifically, the now-separate GE Aerospace company, as a possible choice. The firm's change into a concentrated aerospace and defense business seems to be connecting well with the market's interest in high-quality industrial growth.
Matching the Main CAN SLIM Fundamentals
The "C" and "A" in CAN SLIM require excellent current quarterly results and a record of yearly earnings growth. GE Aerospace shows the strong, increasing quarterly momentum the method values.
- Current Quarterly Earnings (C): The company announced a year-over-year EPS increase of 44.3% for its latest quarter, well above the method's usual minimum of 18-20%. This shows strong short-term profit growth.
- Current Quarterly Sales (C): Revenue growth for the same quarter was a solid 26.4%, passing the filter's need for 25%. This proves earnings growth is supported by high demand, not only reduced costs.
- Annual Earnings Increases (A): With a 3-year EPS compound annual growth rate (CAGR) of 28.2%, the company meets the 25% goal, displaying continued and notable profit growth over a longer period.
- Return on Equity (A): A very high ROE of 42.9% shows outstanding management skill in creating profits from shareholder equity, a main sign of a quality business. This is much higher than the 10% minimum filter.
Institutional Ownership and Financial Condition
The "I" and "S" rules center on the stock's ownership and financial makeup, which can support or limit its price movement.
- Institutional Sponsorship (I): Institutional ownership is about 80.1%. This is lower than the 85% maximum used in the filter, indicating potential for more institutional purchases, which can give continued support to the share price.
- Supply and Demand / Financial Health (S): The company's debt-to-equity ratio is 1.0, which fits the filter's rule of being under 2. This points to a balanced financial structure that is not weighed down by debt, a good point for stability and future growth options.
Technical Performance and Market Condition
The "L" and "M" rules confirm the stock is not only sound in fundamentals but also showing leading price behavior at a suitable moment.
- Leader or Laggard (L): GE's ChartMill Relative Strength (CRS) rating is a high 92.8. This means the stock is performing better than over 92% of the market, a definite mark of leadership. CAN SLIM looks for these leading stocks, as they frequently provide the largest gains.
- Market Direction (M): The method suggests investing in line with the overall market trend. At present, both the short-term and long-term trends for the S&P 500 are up, creating a supportive environment for high-growth choices like GE to advance.
Summary of Analysis
An examination of GE Aerospace's separate technical analysis and fundamental analysis reports gives a unified view:
- Technically, the stock is very strong, receiving a top rating of 10/10. It is in clear upward trends across all periods, trading close to 52-week highs, and has a high relative strength score that verifies its leading position.
- Fundamentally, the company gets a 6/10. Its notable area is high profitability (scoring 7/10), fueled by its excellent margins and ROE. Growth measures are varied, with very good recent results balanced by a more difficult longer-term past, which mirrors the company's multi-year change. The price remains high on a P/E basis, which is common for high-growth market leaders.
Final Points
For investors using the CAN SLIM approach, GE Aerospace offers a strong example. It satisfies strict numerical filters for high quarterly growth, good yearly earnings improvement, and high profitability. These basics are being acknowledged by the market, shown by its high relative strength and strong price trend. While the price level needs attention and the general market trend must keep being watched, as required by the "M" in CAN SLIM, the company's fit with the method's main growth-and-leadership ideas is evident.
Interested in finding other stocks that fit this high-growth profile? You can run the same CAN SLIM screen yourself using this pre-configured link.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer to buy or sell any security. The CAN SLIM methodology involves risk, and investors should conduct their own thorough research and consider their individual financial situation and risk tolerance before making any investment decisions. Past performance is not indicative of future results.
