Although current earnings will tell investors where the company currently stands, annual earnings tend to paint a more complete financial picture. CANSLIM stock strategists will look back 4-5 years to see if annual earnings have been increasing at a healthy rate. Most investors using CANSLIM tend to prefer companies with annual earnings increases in the 25-50% range. Companies with better-than-average returns tend to see their stock prices rise rapidly, which is why CANSLIM investors target such businesses. However, it is recommended that investors also compare earnings with other companies in the same industry. If the earnings increases are strong and better than the rest of the competition, then the company is in a good position to have a strong period of growth, and therefore, be a sound investment.

Source: www.investorguide.com

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