- Regions A and C had the strongest earnings per share growth over the last 10 and 20 years.
- Region C has the highest operating margins over the last 15 years, but has lagged behind Region A since 2008 (shown below).
- Region B ranks highest on earning quality – that is, the reasonableness of its equities’ reporting earnings is perceived to be the best of the four regions. Region C ranks lowest.
|Valuation (30%)||Profitability (25%)||Leverage (10%)||Quality (20%)||Growth (15%)||Final Rank|
Region D – Europe
Region A – US
Region B – Japan
Overall rank = 1. The analysis is consistent with a preference for EM over DM equities. EM is second most attractive on valuation after Europe. Profitability, which may surprise some, leverage and growth components all point toward EM equities as first compared to other regions. However, EM performs worst on the earnings quality and volatility components of the ranking – is this enough to offset all the other metrics? The market thinks so today, but probably won’t several years from now if earnings quality improves.