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. The approach mixes strict fundamental study with important technical signs to find stocks with solid earnings momentum, institutional interest, and better price performance, preferably during good market periods. The aim is to locate companies showing forceful growth that is being seen and followed by the wider market.
A recent filter using this method has identified INNOVATIVE SOLUTIONS & SUPPORT (NASDAQ:ISSC), a maker of flight navigation and cockpit systems for commercial, business, and military aviation. A detailed look shows that ISSC displays a strong profile matching several main CAN SLIM principles.
Meeting the CAN SLIM "C" and "A" Criteria: Notable Current and Yearly Growth
The "C" in CAN SLIM means Current Quarterly Earnings and Sales, needing major and frequently speeding growth. The "A" calls for solid Yearly Earnings Gains, confirming steadiness beyond one quarter. ISSC does very well on these points, displaying striking recent results supported by firm multi-year growth.
- Current Quarterly EPS Growth: The company announced a 450% year-over-year rise in earnings per share for its latest quarter, greatly exceeding the method's usual minimum of 20-25%.
- Current Quarterly Sales Growth: Sales for the same time grew by 36.6%, also above the common filter level of 25%.
- Annual Earnings Growth: Over the last three years, ISSC has reached a compounded yearly EPS growth rate near 40%, easily passing the system's search for gains of 25-50%.
This mix of very strong short-term momentum and firm long-term growth is a key part of the CAN SLIM way, as it points to a company with forceful business activity.
Solid Fundamentals and Financial Condition
Beyond basic growth, CAN SLIM stresses financial strength and good management. ISSC's fundamental profile, shown in its detailed fundamental study report, backs its growth story with good basic measures.
- Return on Equity (ROE): With an ROE of 27.6%, the company shows very good use of shareholder money, easily passing the 10% minimum often used in filters and putting it in the high group of its field.
- Debt Management: The company holds a careful balance sheet with a Debt-to-Equity ratio of 0.31. This is much lower than the filter's limit of 2, showing low financial danger and need, which fits the "S" (Supply and Demand) rule's liking for solid financial condition.
- Overall Fundamental Score: ChartMill gives ISSC a fundamental score of 7 out of 10, noting very good profit and great financial health. The report states the stock is not priced too high while showing very good growth, a mix seen as fitting for growth and quality investing.
Leadership and Institutional Interest
The "L" and "I" of CAN SLIM center on market leadership and institutional interest. The method looks for stocks doing better than most of the market and getting notice from professional investment companies.
- Relative Strength (RS): ISSC has a strong relative strength score of 98.68. This means its price action over the past year has done better than almost 99% of all stocks, making it a clear market leader. This directly meets the "L" rule and is a key technical sign of its fundamental strength.
- Institutional Ownership: About 55.4% of shares are held by institutions. This amount is below the common filter maximum of 85%, indicating there is still space for more institutional purchases, which can give continued demand as more firms learn the story.
Technical Setting and Market Situation
The last "M" in CAN SLIM means Market Direction, telling investors to match the general market trend. Right now, both the long-term and short-term trends for the S&P 500 are down, which is a noted difficulty for any stock under this method. However, ISSC's technical view, as seen in its technical study report, stays very firm on its own.
The stock gets a full technical score of 10 out of 10 from ChartMill. It is trading in the higher part of its 52-week range and keeps a positive long-term trend, doing much better than both its industry group and the wider market over the past year. While the current down market trend suggests care for new purchases under strict CAN SLIM rules, ISSC's technical strength indicates it is a stock to watch for when market situations get better.
A High-Growth Candidate in a Difficult Market
INNOVATIVE SOLUTIONS & SUPPORT makes a notable case for investors using the CAN SLIM structure. It meets the most important fundamental growth rules with exceptional force, supports that growth with high profit and a clear balance sheet, and has the price movement of a confirmed market leader. The main warning comes from the overall "M" factor, as the current down market trend goes against the system's rule to invest mainly in rising markets.
For investors wanting to see other stocks that pass similar high-growth filters, you can see the newest results from our O'Neill CANSLIM High Growth filter.
Disclaimer: This article is for information only and is not investment advice, a suggestion, or a deal to buy or sell any security. The study is based on data and a specific investment method; past results do not show future outcomes. Investors should do their own study and think about their personal money situation and risk comfort before making any investment choice.