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Hi All: ACN is a global, solid company which appears to be meeting CANSLIM criteria & is popping up on many of my screens. Though it is not in the IBD 50 or Big Cap 20, it does make the IBD 85-85 List. Unlike many of the stocks we look at, this one pays a tangible dividend to accentuate gains. The most recent breakout was on >500% vol and we are now way past a proper buy point but I am watching for it on the pullback towards the 50 DMA. The top acceptable purchase price (based on the 5% rule) = $58.54. Solid earnings stability and accumulation on volume. ROE=63% (with zero debt) and a new CEO (for the "N"). Accelerating sales and earnings! This may make it to my Monday list! Brad
Looks like a great stock. I picked it up on my radar when it broke out on 3/25 after it released it's EPS for the Qtr. I dropped it, as it went sideways and it's fundamentals were not as good. I did a quick screen for just three parameters, Accelerating EPS growth, Last Qtr EPS growth > 30% and Next Qtr Est EPS > Last Qtr Actual EPS. Only 23 stocks have these attributes, including ACN. If you add filters for Comp Rating, Avg Daily Volume and % off highs, you get 6 stocks (ACN, EQIX, CPRT, FMX, SAH, JOYG). Few stocks actually have accelerating EPS growth AND higher Next Qtr Est EPS. If you factor in Accelerating Sales Growth, only ACN passes. Recently, many of the stocks I have applied CANSLIM to are exhibiting decelerating EPS.
My CANSLIM notes,
C=Great Accelerating EPS & Sales growth, a rarity; Nice EPS Est Revision trend;
A=It's Last Annual EPS growth was -4% and Sales growth was 0 (See notes below on turnaround stocks); Profit margins hiting a new high - but @ 12.6% is lower than others in its industry; Cash Flow is great.
N=Great, 2001 IPO; recent coverage in IBD; New CEO (reinforces the turnaround story);
S=Poor Supply/Demand rating; while its average daily volume is great, Its float is huge providing a large supply of stock; its Beta is 0.8 a bearish sign for me; a market cap of $44B will put a drag on it;
L=Its sector rank is 18 and hasn't been a leading sector in a while; its industry rank is 59, ok, but not great,
I=a great sponsorship rating, but the Number of funds owning it in Mar-11 is lower than Jun-10.
At the recent Level II class in Chicago, they discussed some recent analysis on turnaround stocks. They described what a turnaround stock looks like before it made its move. Check out the screen, it is dated 6/8, titled "Turnaround Screen". This is almost a match. It screens for EPS % Chg Last Qtr > 35 and ACN has just 32, but pretty close. The New CEO and the flawed Annual EPS & Sales fits into this turnaround story.
I think it has left the gate for this buy, but I will be watching it for any pullback.
I like your CANSLIM break out. Please do keep that up.
If you like this group, look at VRTU. It's ready for a break out,,, or perhaps a handle.
ibd-paluszak: Great posts over the past couple of days!
Is there any way you can share your MS screen through MS share feature? Thanks!
Your comment about how great the ROE is, sat wrong with me. Normally, if a stock has an ROE > 50 I am suspect of it. This was no difference. However, the typical culprit is debt, which you pointed out was low. I looked into it, and t didn't take long to find the culprit - generaly a look at it's balance sheet and cash flow statements will give you the answer. In this case, ACN has been engaged in an agressive stock buy back, its buy backs over the past 5 fiscal years has averaged $2.1B/yr. With a market cap of $44B, that is almost 6% of its stock. It can do this due to the cash flow it generates. The problem with buy backs that are this agressive is that it inflates the EPS growth data, with fewer shares the earnings per share goes up. Even if the company has no sales growth, its EPS will still go up as long as its income doesn't fall by a larger percentage. Another red flag, is that the EPS growth wasn't supported by a similar sales growth, which is why in 2009 FY, you had sales down 8.5%, but EPS was up 5%, in 2006, its EPS growth was over 3 times (323%) its sales growth. If you look at the actual growth in income (not the per share values), you see a much slower growth rate. I like to see EPS growth within 50% of its sales growth.
Tom, and S,
I do the CAN SLIM checklist for stocks that I am looking to buy -- so I can't promise to post many.
VRTU isn't on my radar. With an average daily volume of 97,000, i won't really be looking into it.
I can't post the screen. Conditions such as Next Qtr Est EPS > Last Qtr Actual EPS are not avaialble in MarketSmith. The two indicators are available seperately, but the screening tool, doesn't allow you to compare two indicators. So I add these two indicators to a custom layout, export it all to excel and then use Excels filter tools to do the screens.
To all: Great discussion. I greatly appreciate your more in depth analysis of the ROE/Low debt conundrum ibd-p. I was aware they have a buyback program which I, clearly somewhat cavalierly, took as a positive. The numbers never lie (well, at least not often). I too appreciate your CANSLIM breakdown. Good discipline! Brad
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