U.S. companies will probably continue buying back stock this year, which boosts earnings per share (EPS), but what’s really needed is genuine profit growth, says BCA Research.

In a research note, Montreal-based BCA estimates that buybacks boosted EPS growth by two percentage points in 2012. “It would not be surprising to see a similar or higher contribution to EPS growth in 2013,” it says.

However, BCA also maintains that “the key to sustaining the equity bull market is growth, not buybacks.”

While share buybacks generally occur when economic activity is robust, BCA says buybacks are not a leading indicator for the economy. “Equity retirements typically ramp up only after real GDP growth has risen above a trend pace, and quickly fall off when growth drops below trend,” it notes. “As such, buybacks are more of a reflection of the economic and financial landscape.”

Moreover, it says the relative valuation of stocks and bonds suggests that there’s a strong incentive for firms to issue bonds and buy back stock at the moment.

“Buybacks won’t save the day if underlying profit growth stagnates again in 2013 as it did in 2012. Fortunately, the signs are pointing to a better year ahead,” BCA concludes.