Life is hard when it comes to forecast future returns. How much expected earnings growth accounts for relative performance? Based on data by Factset about Stoxx 600 securities as of November 30, 2013, picking the top 115 12-month performers vs. the index and comparing them with the top 115 securities in terms of analysts’ consensus expected growth over 2012/2014, I have found that only 29 stocks are in both lists meaning that top growers aren’t necessarily top performers. Furthermore, a poorly meaningful relationship remains between the 29 survivals (see chart below).
If you expect performance to be systematically compounded by growth, you’re wrong and you’d better go back to school. School of finance, perhaps.