Ben Graham, the Father of Value Investing, writes the following at the start of Chapter 37 of Security Analysis…
In the last six chapters, our attention was devoted to a critical examination of the income account for the purpose of arriving at a fair and informing statement of the results for the period covered.
The second main question confronting the analyst is concerned with the utility of this past record as an indicator of future earnings.
This is at once the most important and the least satisfactory aspect of security analysis. It is the most important because the sole practical value of our laborious study of the past lies in the clue it may offer to the future; it is the least satisfactory because this clue is never thoroughly reliable and it frequently turns out to be quite valueless.
These shortcomings detract seriously from the value of the analyst’s work, but they do not destroy it. The past exhibit remains a sufficiently dependable guide, in a sufficient proportion of cases, to warrant its continued use as the chief point of departure in the valuation and selection of securities.