The S&P 500 is having quite another year following its robust return in 2021. No doubt part of that is the sharp rebound in 2021 EPS expectations for the 500 companies that comprise that market benchmark, which also serves as a proxy for the market’s valuation. As we kick off the week, that market barometer is trading at ~21.3x forward EPS expectations of $223.48, which is a few valuation points above the 19.1 average at which the S&P 500 peaked over the 2000-2020 period. There have been a few years that peaked considerably higher, like 2020’s 27.1x but we also have to consider that the S&P 500’s EPS for that year was rocked by the impact of Covid.

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Peering into that 2022 EPS forecast of $223.48, it hinges on a continued recovery in the first half of 2022 followed by more subdued EPS growth in the second half of the year. The forecast for the first half of 2022, a period in which positive GDP is expected despite what are likely to be at least some lingering effects of the Omicron variant, is reasonable but we could see some revisions emerge for the current quarter. We’ll get a much better sense if that is likely when we get the December PMI data from ISM and Markit Economics next week.

Here’s the thing, with the market multiple near average historical highs, and a Fed that is likely to start taking away the punch bowl in 2022 for the market to grind higher, upside to be had in the S&P 500 is more likely to come from EPS growth than multiple expansion. Can multiple expansion happen? Sure there is room for that, but to see significant upside we’re going to need to see real EPS growth.

I say largely because a number of companies in recent weeks, including Stanley Black & Decker (SWK) , Johnson Controls (JCI) , Zoetis (ZTS) and a host of others have announced upsized share repurchase plans. According to S&P Global Market Intelligence, there was $3.78 trillion in cash and equivalents on hand the aggregated S&P 500 companies, up 11% year over year.

What Bob Lang, the folks over at Action Alerts Plus and myself will be focused on its operating profit growth and operating margin expansion, both of which are high enough in a company’s income statement that it not only shows the operating leverage of the business at hand, they also don’t feel the impact of buybacks and screwy tax rates. And for those wondering if I’ve seen companies report higher year over year EPS despite their operating income falling year over year, the answers is a resounding “yes!” And my response to that is “no thank you, please.”

(This commentary originally appeared on Real Money Pro on Dec. 27. Click here to learn about this dynamic market information service for active traders and to receive Doug Kass’s Daily Diary and columns from Paul Price, Bret Jensen and others.)