The Earnings Per Share EPS is a financial metric that in one fell swoop tells owners of a company what the value of their shareholding in it is. It is calculated by taking the total Earnings (net profits after tax) and dividing it by the total number of shares held by owners. The higher the EPS the more valuable the company …
Take the above Infograph ….
It tells you about the future trend of EPS going forward up to 2023 of all company-shares traded on the stock exchanges in the USA as compared to those in other major stock markets of the world .
What do you see?
You see that the future 21-23 trend-line of EPS of companies in the USA vaulting high over that of the rest of the world .. . dwarfing them almost by a factor of 300%! The projected EPS for the US companies is expected to register and trade @ 250 while the stock markets in the rest of the world are putting a value on their companies at barely a third @ 75!
What does this mean ?
That there is something in the future to 2023 that American investors are able to foresee and be truly super-optimistic about which company shareholders in the rest of the world clearly do not . There is a raging Bull running amok in the US stock markets, while there are only sloth Bears lazing about in the markets of the rest of the world! Why should there be such a wide and asymmetric differential in the corporate optimism of the American and Rest of the World?
The last time anything like this was seen was back in the 1990s when similar trend was described by the central banking guru of the world the US Fed Chairman, Alan Greenspan, as the “irrational exuberance of markets”. That was the prelude to a massive worldwide revolution in Technology that was on the cusp of happening —- Dot.com, Internet, Telecommunications, Mobile telephony, real-estate and globalised free-trade ….
This time around one wonders what revolution in a world devastated by the Wuhan-virus could be hovering on the horizon of 2023 that is cause of so much “irrational exuberance” in the US stock markets which the rest of the world however does not care to share?
Here’s a thought to chew upon: Is something going to happen to China by 2023 that perhaps is what makes investors think that their US stock valuations will go soaring into the skies as this Infograph suggests it will ?
Sudarshan Madabushi