UNDERSTANDING THE “C” IN CAN SLIM

At GoldenTicker.com we scan thousands of stocks looking for the next big winners whose current quarterly earnings display many of the following properties. We do this time consuming work so you don’t have to. If you want to have a better understanding of the methods we use please read further.

C – CURRENT QUARTERLY EPS

“EARNINGS MAKE THE MARE GO” - The percentage change in quarterly EPS (earnings per share) is currently the most important element in stock selection – the higher the better.

EPS is calculated by dividing total after tax profits by the number of shares outstanding.

EPS SHOULD BE UP BIG! Insist on current quarterly EPS of at least 25%. The higher the better. A 10% change is not enough to fuel a big price move. The best stocks have current earnings up 50%- 100% - 200% and more! The average EPS of the all-star stocks before they made their huge moves was 70%.

WEAK EARNINGS = WEAK STOCKS - Stocks without great earnings decline the most during bear markets and downturns.

BOOMING STOCKS = BOOMING PROFITS  - all super-stars had this quality.

FOLLOW THE EARNINGS - Following the earnings will always lead you to the best stocks even in a “market bubble” like 1999-2000.

LOOK FOR THE MEGA EARNERS - The very best companies have EPS up 100% or more! Only a very small % of stocks have this quality.

DON’T COUNT ONE TIME LARGE EPS GAINS - Omit a companies one time extraordinary gain. This can skew EPS.

LOOK AT EARNINGS PROJECTIONS - Check ahead for consensus EPS estimates to make sure the stock is on the right track. They should be up at least 15% (less than the 25% threshold because analysts tend to be very conservative. Thompson First Call and Reuters monitor this.

EARNINGS ACCELERATION – Look for earnings acceleration sometime in the last 10 quarters. For example 12%, 15%, 45%. With the best companies, their earnings accelerate over the previous three or four quarters. Some stocks earnings accelerate  before their  jump in price begins.

BEWARE OF EARNING DECELERATION If a stocks earnings for the same quarter start deteriorating for more than 2 quarters you might want to sell. An example is earning coming in at 45%, 37%, 15%. Do not buy if a stock exhibits this. Sell the stock if you own it. This is a topping sign despite analyst recommendations.

CONFIRM AN EARNINGS SLOWDOWN BEFORE SELLING - Confirm earnings slow downs by seeing at least 2 quarters of a material slowdown. Even the best companies can have a bad quarter. A 2/3 slowdown can derail a stock.

TRACKING EPS - Log EPS acceleration on a logarithmic graph – Log the last  4 quarters. The last quarter should be near a new high. When you plot the last 3 years of quarterly earnings on a log graph, the line should be almost straight and heading up.

SALES GROWTH - Look for quarterly sales growth of 25% or more in the most recent quarter or at least an acceleration in sales over the last 3 quarters to confirm the EPS growth.

MANY IPO’S LACK EARNINGS HISTORY – but some good IPO’s show huge sales increases: 8-12 quarters of huge sales increases of 100% or more. These stocks can still be bought even though they have no earnings.

OTHER STOCKS IN THE GROUP SHOULD HAVE STELLAR EARNINGS Check other stocks in the same industry group - at least one other should have impressive earnings.

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