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 at solid earnings and sales increases, with important technical signs to time purchases during good market periods. The aim is to locate firms with strong growth stories that are also being noted and bought by large investors. A recent scan using main CAN SLIM filters has identified Companhia de Saneamento Basico do Estado de Sao Paulo SABESP (NYSE:SBS), a Brazilian water and sewage utility, as a possible choice for more detailed review.
Matching the Main CAN SLIM Rules
A key benefit of the CAN SLIM method is its use of measurable filters to reduce the list of stocks. SBS shows notable performance against many of these important standards:
- Current Quarterly Earnings & Sales (The "C"): The system requires large, and ideally increasing, quarterly growth. SBS states a very high 110.5% year-over-year earnings per share (EPS) growth for its latest quarter, well above the common 20-25% minimum. Alongside this, revenue growth rose by 43.9% for the same time, showing strong top-line speed that backs the bottom-line jump.
- Annual Earnings Increases (The "A"): CAN SLIM searches for a history of growth, not just one quarter. SBS displays a solid 3-year EPS compound annual growth rate (CAGR) of 41.3%, easily meeting the system's target of 25-50%. Also, the company has a Return on Equity (ROE) of 20.0%, which is high on its own and shows very good use of shareholder money, a main profit measure liked by O’Neil.
- Supply, Demand, and Financial Health (The "S" & "L"): The system chooses companies with acceptable debt and good market standing. SBS keeps a careful Debt-to-Equity ratio of 0.83, which is under the scan's filter of 2.0 and points to a firm financial position. Significantly, the stock shows very good market performance, with a Relative Strength rating of 91.8. This means it is doing better than over 91% of the market, a sign of the "L" (Leader) rule that finds stocks already in high demand.
- Institutional Sponsorship (The "I"): While institutional ownership is noted at 62.4%, it stays below the 85% limit often used in scans. This indicates potential for more institutional finding and purchasing, which can give added price support and speed, a process important to the CAN SLIM idea.
Fundamental and Technical Summary
A look at SBS's separate reports gives a wider view for these scan outcomes. The fundamental analysis report gives SBS a score of 6 out of 10, noting a "excellent profitability rating" from its higher ROE and margins versus industry others. The price is seen as "fair," trading at a P/E ratio that is lower than the wider market and many of its utility industry rivals. The main points of care in the report focus on a prediction for a small drop in short-term EPS growth and some parts of financial condition, though its cash and debt ratios stay good within its field.
The technical analysis report is particularly strong, giving a top rating of 10 out of 10. It agrees with the leader status shown by the relative strength, stating SBS is doing better than 100% of its industry peers. Both the long and short-term directions are up, and the stock is now trading at new 52-week highs, a standard CAN SLIM buy sign. The technical note does say the recent fast rise may need a time of pause before a new good purchase point appears, matching the system's emphasis on buying from "correctly shaped bases."
A Choice for More Review
For investors using the CAN SLIM structure, Companhia de Saneamento Basico do Estado de Sao Paulo SABESP offers a notable example. It meets several, strict number-based filters about high quarterly growth, good yearly earnings record, high profit, low debt, and better market price action. These are the needed parts the system aims to find before more detailed review on the company's "new" products or services, here its basic role in São Paulo's water system, is done.
It is key to recall that a scan result is a first step, not a final suggestion. The "M" in CAN SLIM, Market Direction, is a vital last test. While the S&P 500's long-term direction is now up, investors must always review the general market setting before any action.
This scan activity is part of a regular process. You can see the present list of stocks meeting like CAN SLIM-based filters by going to the set scan tool here.
Disclaimer: This article is for information and learning only and is not investment advice, a suggestion, or an offer or request to buy or sell any securities. The review shown uses data and scans thought to be dependable, but its correctness is not assured. Investors should do their own complete research and checking, thinking of their personal money situation and risk comfort, before any investment choice.