A paper by Hendrik Bessembinder: The Role of Net Income Growth in Explaining Long-Horizon Stock Returns by Hendrik Bessembinder :: SSRN](The Role of Net Income Growth in Explaining Long-Horizon Stock Returns by Hendrik Bessembinder :: SSRN) describes using Net Income growth to obtain excess returns. The paper does not describe the look back period or the holding period.
Are there any screens using Net Income Growth that have been developed for GTR1?
Extract from Introduction from paper.
This finding has naturally spurred interest in assessing which, if any, firm characteristics
are associated with outsized stock price performance. Bessembinder (2022) examines stock
market outcomes at the decade horizon, and reports that firms with the strongest stock market
performance tended to be those characterized by rapid rates of growth. In this paper, I further
investigate the variables that explain decade-horizon stock performance. I show that growth,
whether measured in terms of net income, total assets, or sales individually has strong
explanatory power, as excess annualized returns for stocks in the highest growth quintile exceed
those for stocks in the lowest growth quintile by between 13% and 29% per year. However,
average profitability also has important explanatory power.
A direct statistical “horserace” that considers all variables simultaneously shows that net
income growth is by far the strongest variable in terms of explaining decade-horizon stock
returns. Average profitability also contributes, while sales and asset growth have almost no
explanatory power in the horserace.