Where Do Returns Come From?

As Q3 earnings season is about to kick off we’ll look at what the drivers of returns are for the S&P 500 Index and individual stocks. Annualized returns are a mix of sales growth, margin growth, dividends, share count, and PE multiple growth. See how to think about these levers in relation to price.

What are the return attributions of the S&P 500 Index returns?

PE multiple growth vs multiple contraction

How share buybacks or issuance increase or decrease earnings

Dividend yield as a percentage of total return

Net Margin expansion or contraction

Sales growth has been lower than you might think over the last 10 years

EPS or earnings per share

2022 Q3 earnings estimates on EPS and sales

Nature of rotation of sectors contributing to total earnings of the S&P 500

Value After Hours podcast and YouTube channel

Mentioned in this Episode:

Augustus investor letter (click on first one) page 24 breaking down 2011-2021 earnings attributions https://www.semperaugustus.com/clientletter

Refinitiv Q3 earnings preview breakdown https://lipperalpha.refinitiv.com/2022/10/sp-500-22q3-earnings-preview-a-turning-point/

Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr

Contact Derek [email protected]