Findings show that companies in which the market has high expectations, as measured by the above ratios, have consistently performed the worst. The reason is, that a market premium is paid for near term ‘visibility’ on earning prospects. To evaluate the value of a company, forecasts must be made with extreme accuracy into the future. We have already discussed this earlier – this is very difficult to do. Investors and analysts also have confidence and optimism that earnings expectations will be met. Over-confidence about information and forecasts, a reliance on ‘experts’, and over-optimism leads to a deadly combination. This is something …Read more »