Can listed US companies sustain earnings growth?

February 2025

The prices of publicly traded companies’ shares are understood to incorporate the market’s expectations for future earnings growth. Companies that are projected to increase their revenue and profit margins faster than the market typically enjoy higher valuations. With prices for the US equity market approaching all-time highs, the market is discounting significant earnings growth to justify those valuations. The earnings growth rates US stocks have achieved in the post-GFC period could support these valuations if these growth rates are sustainable.

The question of whether earnings growth can meet investor expectations is urgent, but it is not easily answered. This research note provides an overview of some variables that have historically been associated with earnings growth to help predict future earnings growth for the broad equity market. It also addresses differences in these factors between the US and other markets that may be driving disparities in earnings growth and valuations relative to non-US markets.