Equity valuation - Earnings Growth
EU EPS Growth - Stoxx 600
Insights | EU
EPS (Earnings-Per-Share) measures the portion of a company's profit allocated to each outstanding share. EPS growth tracks profitability change over time. It is the ultimate gauge of fundamental equity growth potential. In this chart, we track the aggregate EPS growth trajectory for the entire EU equity index.
CURRENT READINGS
The expected EPS growth for the closing quarter stands at -0.4% , and is expected to go to 17.4% later (all data is Year-on-Year).
MARKET IMPLICATION
Long-term equity returns are always correlated and driven by a change in earnings, while the link tends to be less linear in the short-term as stocks can be pushed and pulled by many factors. Right now we observe a weak (0.00) 3-month correlation between EPS growth and equity returns, meaning that EPS growth did not drove stock prices in the short-term.
US EPS Growth - S&P 500
Insights | US
Refer to the EU intro above for the concepts of EPS and EPS growth. For the US, we track both the Year-on-Year and Quarter-on-Quarter EPS growth.
CURRENT READINGS
The EPS growth for the US is expected at 18.9% YoY, while the latest quarterly EPS growth has run at 2.7%, falling from prev quarter.
It is then expected to move up and down with some volatility in the upcoming future.
MARKET IMPLICATIONS
As mentioned above for Europe, stock returns follow earnings growth in the longer-term. In the short-term, we observe weak (0.00) 3-month correlation, meaning that EPS growth did not drove stock prices recently.