Ranking stocks based on EPS growth rates

#1
Hi!

This is not a HW problem. To rank stocks based on their EPS growth rate, I plan to do the following:

1 - Calculate the stocks' EPS quarterly growth rate versus the prior year (to reckon with seasonality) for the last 3 years (4 years of data) and calculate the 3-year arithmetic average rates

2 - Rank the stocks using the 3-year arithmetic average rates measured as follows: 3-year arithmetic average rate minus twice the standard error

Does that make sense?

Thank you!

Doctor T
 
#2
Not quite. It is better to consider t-statistic = [Average EPS] / [Standard Error of Average EPS]. Such ranking would be related to the popular procedure where assets are ranked using the Sharpe ratios associated with trading them.