Who is William O'Neil, and what is the CAN SLIM Screen?
William J. O'Neil started on Wall Street and went on to found William O'Neil & Co., a research firm whose products included the Daily Graphs chart service. In 1983 he launched Investor's Business Daily, a newspaper built to print the exact data his method relied on, and he set the method out in full in his book How to Make Money in Stocks. O'Neil's CAN SLIM Screen turns that method into a repeatable filter — a growth-and-momentum approach drawn from his study of roughly forty years of the market's biggest price gainers.
CAN SLIM is O'Neil's mnemonic for the seven traits he saw again and again in stocks before they led the market: Current quarterly earnings, Annual earnings growth, a New product, high or management change, Supply and demand, Leader (not laggard), Institutional sponsorship, and Market direction. The screen mechanizes the parts that can be measured and leaves the judgment calls to the investor.
The core idea
O'Neil was not hunting for cheap stocks. He wanted companies that were already accelerating and whose share price confirmed it. The fundamental engine is earnings that are not merely growing but speeding up: quarterly profit rising faster than it rose the quarter before, on top of five straight years of annual gains. The technical engine is price — a stock trading near its 52-week high with relative strength in the top tier of the market, backed by a handful of institutions that have already taken positions.
His study of past winners is the reason those pieces sit together. O'Neil found that about 95% of the big performers had a fundamental spark behind the move — a new product, a change in management, or a fresh price high after a period of consolidation. He also concluded that a genuine leader keeps leading, which is why the screen rejects the cheaper "sympathy" stocks in a hot group and demands relative strength instead.
What O'Neil's CAN SLIM Screen looks for
- Quarterly earnings per share from continuing operations — the latest fiscal quarter (Q1) against the same quarter a year earlier (Q5) — up by 20% or more.
- That latest-quarter increase (Q1 over Q5) must be larger than the prior quarter's year-over-year increase (Q2 over Q6): growth that is speeding up, not fading.
- EPS from continuing operations positive in each of the two most recent quarters (Q1 and Q2).
- Earnings per share from continuing operations growing at 25% or more per year over the past five years.
- EPS from continuing operations higher in every one of the last five fiscal years, and higher again over the trailing 12 months.
- Current price within 10% of its 52-week high.
- A float of fewer than 20 million shares.
- 52-week relative strength in the top 30% of the entire database — a percentile rank above 70.
- At least five institutional shareholders.
- Companies that trade over the counter (OTC) are excluded.
Supply and demand: why the float limit does the heavy lifting
The float is the number of shares actually available to the public — shares outstanding minus the block held by insiders and management. Capping it below 20 million is the criterion that gives this screen its character. The logic is simple supply and demand: when a catalyst arrives, a small float has fewer shares to absorb the buying, so the price moves further and faster than it would in a company with hundreds of millions of shares outstanding.
O'Neil's data backed the idea. In his review of winning stocks, roughly 95% had fewer than 25 million shares outstanding, with a median near 4.6 million. A separate study by Marc Reinganum in the September 1989 AAII Journal reached a similar place and set its cutoff at 20 million shares, with a median of about 5.7 million that tended to double as the winners ran and split their stock. The 20-million-share float rule is the least restrictive filter on its own, but it is what tilts the whole screen toward small, under-owned companies with room to re-rate.
What to keep in mind
This is a momentum method, and momentum cuts both ways. The screen buys stocks near their highs with strong relative strength, which means it can also buy right before a reversal — the same price strength that flags a leader can mark a top. The small-float requirement compounds the problem: thin shares are illiquid, so entries and exits move the price against you, and a name that races up can retrace just as sharply. Results also cluster in a handful of hot industries, so concentration risk is real. Finally, the screen measures the numbers but not the story — it cannot tell you whether the "new product" behind a run is durable or a fad, and the Market-direction (M) piece of CAN SLIM stays a judgment call rather than a line in the filter.
Sources
How to Make Money in Stocks: A Winning System in Good Times and Bad, William J. O'Neil, McGraw-Hill.
American Association of Individual Investors (AAII) — Stock Investor Pro screen definition and commentary.