Finding the next winning growth stock may be on your to-do list, but stock analysis can feel daunting. The IBD Stock Checkup tool applies the CAN SLIM approach to evaluate stocks and offers more.
The tool can be found under the Research tab of Investors.com and includes a CAN SLIM checklist, ideal for the investing strategy that has outperformed the market over many decades.
It starts by comparing the top five stocks in the industry group using the five IBD ratings, each on a separate tab. Each tab gives the numeric rating and the company's ranking within the group. Additional buttons allow you to see a full-size graph, or add the stock to a watchlist.
Each item is color-coded with a green, yellow or red dot for quick evaluation, and that's the strength of this research tool. Green signals a top rating, yellow is suboptimal, and red means underperform. You can see a definition of the metric by hovering with your mouse over the criteria name. Don't expect any stock to get all greens; most winners will have a few weak scores.
The analysis starts with a top-down approach and goes into a more granular level. The Composite Rating combines five IBD SmartSelect Ratings into one number, with 99 being the highest.
Start With Market Direction, Industry Rankings
The M in the CAN SLIM investing strategy stands for Market Direction. IBD evaluates the major indexes' price and volume, and updates market direction daily. Three out of four stocks will follow the direction of the general market, so it's crucial to get this part right. The rule is to make new purchases only in a market uptrend.
Next, we are looking for companies in leading industries. The L in CAN SLIM stands for leader or laggard. We want companies in the top 40, but ideally in the top 20 of the 197 industries IBD tracks. According to "How to Make Money in Stocks," 37% of a stock's movement is tied to the performance of the industry group and another 12% comes from its sector. We are looking for an A or B Group Relative Strength Ratings.
Stock Analysis Using Fundamentals
The Fundamental Performance section analyzes quarterly and annual earnings, plus sales and profitability statistics. Leading stocks must score well in these areas. We look for current EPS growth, the C in CAN SLIM, of 25% or higher, with preferably accelerating quarter-over-quarter growth. Other data points include EPS Rating and the latest quarter's earnings surprise.
The A, or annual earnings growth, target is 25% or higher over the last three years. Sales and profitability metrics follow.
The technical performance section delves into key metrics such as Relative Strength Rating and price versus its 50-day moving average.
Lastly is the chart and recent IBD articles discussing the company. The chart helps identify buy points, while articles provide some background on the company.
This article was originally published Sept. 2, 2022, and has been updated.
