Earnings Acceleration

Why Tracking Secular Trends May Help Predict Growth in EM Companies

By Patricia Ribeiro & Nathan Chaudoin - June 2019

Key Takeaways

  • Earnings acceleration drives stock price performance. Academic research supports our belief that changes in operating earnings per share (EPS) have a material effect on stock prices. This relationship has borne out over 45 years’ worth of data spanning bull and bear markets and dramatic shifts in size and style leadership.
  • Inflection points signal opportunities. Our team utilizes a disciplined methodology to identify key inflection points in company earnings that may signal an opportunity to generate superior long-term, risk-adjusted investment performance.
  • Secular trends in emerging markets (EM) create earnings growth potential. Fundamental, bottom-up analysis that considers earnings acceleration can help identify companies positioned to benefit from such trends and themes.
  • Past trends may provide insights. Reviewing how past secular trends played out in emerging markets may suggest how an earnings acceleration philosophy can be applied to building an EM portfolio today.

Our Emerging Markets Equity team believes earnings acceleration—when a company’s EPS are growing at an accelerating rate—represents one of the most important indicators of a stock’s potential to increase in price. Correctly using earnings acceleration to forecast the extent of sustainable improvement may help generate superior investment returns. Employing that process in concert with analyzing and monitoring long-term secular trends can be applied to investing in emerging markets.

Patricia Ribeiro
Senior Portfolio Manager
Global Growth Equity
Nathan Chaudoin
Nathan Chaudoin
Senior Client Portfolio Manager
Global Growth Equity

Earnings Acceleration

Market Perspective | June 2019

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      Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

      The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.