From Dan Ferris, Editor, Extreme Value:
If you believe higher earnings will make stock prices go up, you’re not completely wrong… But the highest earnings growth doesn’t make stocks go up the most. In fact, history shows the S&P 500 Index tends to perform poorly when earnings grow more than 20% per year. (S&P 500 earnings are growing about 24.9% per year right now!). I’ll quote the data and tell you where I saw it. Then I’ll tell you what I think is the missing piece of data that better explains why 20%-plus earnings growth has generally led to poor U.S. equity returns in the past.