Predictable EPS growth and the performance of value investing

• 成果类型: Article
• 署名作者: Sloan, Richard G.; Wang, Annika Yu
• 署名单位: University of Southern California; University of Houston System; University of Houston
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-023-09812-6
• 发表日期: 2025
• 页码: 33-78
• 关键词: CONTRARIAN INVESTMENT; Earnings growth; expectations; persistence; valuation; return

摘要

Previous research finds that EPS growth rates are difficult to predict and reasons that much of the observed cross-sectional variation in valuation ratios is due to variation in implied future stock returns. Yet the observed cross-sectional relation between valuation ratios and realized future stock returns is weak. We revisit these findings using a refined measure of expected EPS growth rates and document robust evidence of predictability in EPS growth rates. Moreover, we find that this predictable growth extends beyond two years into the future and is strongly reflected in observed valuation ratios. We show that combining valuation ratios with our refined measure of expected EPS growth rates improves forecasts of stock returns, though return predictability remains weak. Thus, we conclude that most of the variation in valuation ratios is driven by predictable EPS growth.