For example, the mean value premium for the best
earnings quality firms is 0.006 (but not statistically significant), whereas the corresponding value premium for the poorest
earnings quality firms is 0.096 (t - test: 5.96).
More importantly, the value premium increases as we go to lower
earnings quality firms, and this is primarily because of a decline in one year ahead mean returns of the growth stocks across the earnings quality quartiles and a corresponding rise in mean returns of the value stocks.
Not exact matches
«If the market goes through a correction, these lower -
quality firms»
earnings should decrease significantly and performance may suffer.»
The bottom line with any investment is the
quality of the
firm's financial position, prospects for
earnings growth over the next several years, dividend - growth potential, and the strength and defensibility of its industry position.
Incorporated in July 2002, New Constructs is an independent investment research
firm, specializing in
quality - of -
earnings, forensic accounting and discounted cash flow valuation analyses for public companies.
The study found that in more corrupt areas of the U.S.,
firms provide less frequent managerial guidance on
earnings, have lower financial reporting
quality, and their stocks are less liquid.
Quality generally describes financially healthy
firms with high return on equity, with stable
earnings growth and low financial leverage.
«If the market goes through a correction, these lower -
quality firms»
earnings should decrease significantly and performance may suffer.»
Evidence suggests that growth stocks are associated with high accruals, i.e. poor
earnings quality, but what about value
firms?
Weiss requires that
firms have Standard & Poor's
earnings and dividends
quality rankings of A — or better.
Most Focused multi-cap purchase and hold around 35
firms based on structures like growth in
earnings, longevity, and
quality.