One Thing Has Separated The Winners And Losers In The Stock Market For The Last 5 Years

This might be one of the biggest tells in all of corporate America.

When a company stops providing guidance, its stock price lags. Studies repeatedly show this.

In a new report, FactSet’s John Butters charts companies that do provide guidance with companies that don’t.  And the results are pretty clear:

Using FactSet’s Alpha Testing, one can compare the cumulative performance of companies (on a market-cap weighted basis) that issued quarterly or annual EPS guidance to companies (on a market-cap weighted basis) that did not issue quarterly or annual EPS guidance to the benchmark of the S&P 500. Over the past five years, companies that issued quarterly EPS guidance outperformed the S&P 500 by just over 17%, while companies that did not issue quarterly EPS guidance underperformed the index by about 6%. Over the same time frame (trailing 5 years), companies that issued annual EPS guidance outperformed the S&P 500 by just under 6%, while companies that did not issue annual EPS guidance underperformed the index by about 8.5%.

Here’s the quarterly chart:

quarter

Photo: FactSet

And here’s the annual chart:

guidance

Photo: FactSet

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