This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Profit Estimates Require Leap of Faith

P/E Ratio On Estimated 2007 EPS
Click here for larger image.

Among international ETFs, the iShares MSCI Canada fund (EWC) is estimated to have the fastest EPS growth next year, at 15%, though down from 20% this year.

At the opposite end, somewhat surprisingly, is the iShares FTSE/Xinhua China 25 (FXII), with just 4% growth for 2007 compared with 16% this year, and a huge deceleration in earnings growth for the iShares S&P Latin America 40, (ILF), where earnings growth is expected to slow to just 3%, down from 26% this year.

That said, we think it's important not to get caught up in the growth figures for any one year. Amid all the gnashing of teeth on Wall Street about the apparent slowdown in earnings growth, we'd point out that the anticipated 9% earnings growth for the S&P 500 in 2007 is still well above the historical average of just 6.3% annual earnings growth since World War II.

Plus, historically speaking, there is almost no correlation between earnings growth and stock prices in any given year (because changes in interest rates and inflation, price to earnings levels and expectations about the future and other factors also exert a large impact on stock prices).

As a result, we think it makes sense to concentrate on areas with achievable earnings targets, where more reasonable valuations leave room for error in an uncertain world.
Michael Krause is president and founder of AltaVista Independent Research. AltaVista provides fundamentally driven analysis of exchange-traded funds to help investors select ETFs based on investment merit, much the same way they would evaluate a single stock. The firm offers both print and online ETF research to subscribers, but does not manage clients' money. Mr. Krause is also a frequent contributor to broadcast and print media.
3 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
EWC $23.24 0.00%
ILF $23.80 0.00%
IWD $100.88 0.00%
IWM $119.17 0.00%
AAPL $118.03 0.00%


Chart of I:DJI
DOW 17,813.39 +1.20 0.01%
S&P 500 2,088.87 -0.27 -0.01%
NASDAQ 5,116.1430 +13.3350 0.26%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs