CAN SLIM

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DEFINITION of 'CAN SLIM'

A system for selecting stocks created by Investor's Business Daily founder William J. O'Neil. Each letter in the acronym stands for a key factor to look for in a company.

Also referred to as "C-A-N-S-L-I-M" or "CANSLIM".

BREAKING DOWN 'CAN SLIM'

The seven-part criteria is as follows:

C - Current quarterly earnings per share has increased sharply from the same quarters' earnings reported in the prior year. (Beware of items in financial statements that can cause earnings distortions.)

A - Annual earnings increases over the last five years.

N - New products, management, and other new events. In addition, the company's stock has reached new highs.

S - Small supply and large demand for a stock creates excess demand, and an environment in which stock prices can soar. Companies acquiring their own stock reduces market supply and can indicate their expectation of future profitability. Look for low debt-equity ratios.

L - Choose leaders over laggard stocks within the same industry. Use the relative strength index as a guide.

I - Pick stocks who have institutional sponsorship by a few institutions with recent above average performance. Be cautious of stocks that are over owned by institutions.

M - Determining market direction by reviewing market averages daily.

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