A recent study by several academics suggests that analysts are not really very good at predicting growth rates. According to Louis Chan, Jason Karceski, and Josef Lakonishok analysts' predictions for earnings in any five-year period between 1982 and 1998 came in significantly higher than the actual growth rates.

According to I/B/E/S, the average analyst growth expectation on the average company over the next five years is in the range of 20% per year. What the Illinois study found was quite contrary to expectations such as those expressed above. In a universe of more than 9,000 stocks, tracked from 1951 to 1998, only one in 10 achieved a return in excess of 18% over any 10-year period. In fact, the median rate of growth for the companies during this period was about 9%.

This average predicted rate of growth is higher than the growth more than 90% of companies have been able to achieve in the past. Some other data shows that, in any five-year period, less than half of all companies provide any return at all from their purchase price.