Two important components in the CAN SLIM investing guidelines are current accelerating quarterly earnings growth and annual earnings growth, the C and the A in CAN SLIM. Look for these components in the growth stocks you're buying or watching.
One way to find stocks with these positive traits is to run a screen from the Investors.com website. Looking under the IBD Stock Lists drop-down menu, you will find the Rising Profit Estimates screen.
This screen is a good way to scan for stocks where analysts are raising their profit estimates. It compares key proprietary criteria found in MarketSmith, including Earnings Per Share Rating, Composite Rating, Industry Group Relative Strength Rating and company Relative Strength Rating. The result is a list of stocks with earnings growth potential.
You may want to add these stocks to your watchlist, for when the market looks friendly to buy again.
Pharmaceutical Leader Has 2022 Earnings Potential
Merck, a big pharma company specializing in drugs for diabetes, obesity and respiratory and cardiovascular diseases, has seen strong earnings over the last several quarters. Analysts expect 23% growth in annual earnings per share in fiscal 2022, although dropping to only 1% estimated growth in 2023.
The company has an EPS Rating of 93, a best-possible 99 Composite Rating and a Relative Strength Rating of 96. Merck is ranked No. 1 in the ethical drugs industry group, which itself ranks No. 24 out of the 197 industries Investor's Business Daily tracks.
Merck has an impressive 48% return on equity, well above the 17% minimum in the CAN SLIM investing guidelines. The company passes all nine criteria on the IBD MarketSmith checklist. The stock yields a 3% dividend, as a reward to shareholders.
Merck stock is trying to break out of a short base and is within 3% of the 95.02 buy point. It is trading above the 21-day exponential moving average. Shares are hitting a new high on the weekly relative strength line.
Growth Stock Pleases Analysts With Earnings
Simply Good Foods, a healthy snack maker of brands including Atkins and Quest, made the list. This growth stock ranks No. 1 in the confectionary foods group, which is rated No. 19 out of 197 industries. Simply Good Foods has a 94 Relative Strength Rating.
Simply Good Foods reported Q3 2022 earnings on June 30, with a beat on both EPS and sales. Sales came in at $316.5 millions when analysts were expecting $294.1 million, according to FactSet. Earnings per share came in at $0.44 vs. the analyst consensus of $0.35 per FactSet.
But shares plunged more than 8% anyway on Thursday as investors were disappointed by the company's sales and earnings outlook.
"We anticipate that full-year 2022 net sales will increase 14% to 15% and continue to expect adjusted EBITDA to increase slightly less than the net sales growth rate," said Joseph Scalzo, president and CEO. But he added: "Due to the year-to-date, higher-than-usual customer inventory levels, we expect fourth-quarter net sales performance to be below the anticipated retail take-away increase of high single digits on a percentage basis versus last year."
Analysts expect a 14% annual EPS growth rate for fiscal 2022 and 13% for 2023. Simply Good has shown consistent quarterly EPS growth of 44%-48% in the previous three quarters.
The screen shows a best-possible 99 Composite Rating and 97 EPS Rating.
Simply Good's chart is in a consolidation base. The stock is above the 50-day moving average.
Electric Power Has Been A Winner
The energy sector has been one of the only positive sectors in this downtrending market.
PNM Resources, New Mexico's largest electricity provider, makes the grade in our screen.
Analysts are looking for a 4% annual EPS growth rate for fiscal 2022 and 5% for 2023. The company reported quarterly EPS growth of 56% in the March quarter and 33% in the December quarter.
PNM has a Composite Rating of 97 and an Earnings Per Share Rating of 90. PNM also passes all nine criteria on the IBD MarketSmith checklist.
It has an Industry Group Relative Strength Rating of A-. It is ranked No. 1 in IBD's Utilities-Electric Power group, which itself is ranked No. 37 out of 197 industries. The company pays out a 2.9% dividend to shareholders.
The stock price is 5.1% off its 52-week high, holding up much better than the overall market. The stock is forming an odd-looking flat base and is within 2% of the 48.42 buy point. Shares are sitting above the 200-day moving average.
Share price is at a new high on the relative strength line.
