Cumberland Pharmaceuticals (Cumberland Pharmaceuticals) Predictability Rank

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What is Cumberland Pharmaceuticals Predictability Rank?

Warren Buffett said many times that the companies he likes are:

1. Simple businesses that he understands
2. that have predictable and proven earnings and
3. with economic moat
4. those can be bought at a reasonable price.

It is hard to quantify "simple businesses that he (Buffett) understands", so we will focus on the other three characteristics instead. In GuruFocus Research: What worked in the market from 1998-2008? Part I: Introduction of Predictability Rank, we will show that the businesses that have predictable and proven earnings are usually also simple businesses that an average person could understand.

GuruFocus conducted a back test study of Warren Buffett's strategy of "buying good companies at fair prices" for the years from 1998-2008.

Cumberland Pharmaceuticals Predictability Rank Calculation

In our database there are 2403 stocks that have been traded from Jan. 2, 1998 to Aug. 31, 2008. We have the complete 10-year financial data and trading prices of these companies for this period. We rank the predictability of these companies based on the consistency of their revenue per share and EBITDA (earning before interest, tax, depreciation and amortization) per share over the past ten fiscal years, and study the correlation between the stock performances and the predictability of the business.

Our study may be subject to these biases and assumptions:

Dividend yields are not counted for investment returns
Effects of price changes due to spin-offs may not be fully adjusted
Study is subjected to survivorship bias due to de-listing, bankruptcy, LBO, M&A, etc.

The correlation between business predictability and investment returns of a company is showed below.

Correlation Between Business Predictability and Investment Returns

	Predictables	Non-Predictable	All stocks
Total Number of stocks	570	1833	2403
Total Lost Money	61	830	891
Total Lost More Than 50%	18	412	430
Total Lost More Than 90%	4	86	90
Average Gain	260.6%	100.0%	138.1%
Median Gain	150.0%	13.0%	39.0%
Maximum Gain	2852.0%	11483.0%	11483.0%
Maximum Loss	-100.0%	-100.0%	-100.0%
Annualized Average Gain	12.7%	6.7%	8.4%
Annualized Median Gain	8.9%	1.1%	3.1%

For the 570 predictable companies, we have seen strong correlation between the predictability of businesses and the stock performances over the past 10 years, regardless of the valuation of business at 1998. Accordingly, we have ranked the business predictability from 5-star to 1-star, as shown in this table.

Predictability Rank	5-Star	4.5-Star	4-Star	3.5-Star	3-Star	2.5-Star	2-Star	1-Star (non-predictable)	Average among all
% Out of All 2403 Stocks	3.3%	2.9%	3.7%	3.3%	3.3%	3.7%	3.3%	76.3%	100%
% that are in Loss (10y)	3%	10%	8%	9%	11%	18%	16%	45%	37%
Average Gain (10y)	364.6%	330.9%	278.0%	235.1%	243.5%	227.8%	154.8%	100.0%	138.1%
Median Gain (10y)	238.5%	193.5%	171.0%	159.0%	132.5%	113.5%	87.0%	13.0%	39.0%
Maximum Gainer	2228.0%	2547.0%	2452.0%	2852.0%	2432.0%	1892.0%	1807.0%	11483.0%	11483.0%
Maximum Loser	-82.0%	-53.0%	-67.0%	-100.0%	-83.0%	-100.0%	-78.0%	-100.0%	-100.0%
Annualized Average Gain	15.4%	14.6%	13.2%	12.0%	12.2%	11.7%	9.1%	6.7%	8.4%
Annualized Median Gain	12.1%	10.6%	9.8%	9.3%	8.2%	7.3%	6.0%	1.1%	3.1%

For detailed information about each predictability rank, please go to GuruFocus Research: What worked in the market from 1998-2008? Part I: Introduction of Predictability Rank

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Cumberland Pharmaceuticals (Cumberland Pharmaceuticals) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Healthcare » Drug Manufacturers » Cumberland Pharmaceuticals Inc (NAS:CPIX) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

N/A

Address

1600 West End Avenue, Suite 1300, Nashville, TN, USA, 37203

Website

https://www.cumberlandpharma.com

Cumberland Pharmaceuticals Inc is a specialty pharmaceutical company focused on the acquisition, development, and commercialization of branded prescription pharmaceutical products. The company's primary target markets are hospital acute care, gastroenterology, rheumatology, and oncology. The company promotes its approved products through its hospital, field, and oncology sales divisions in the United States and establishes a network of international partners to register and provide medicines to patients in their countries. The company's revenue is derived from the product sales of FDA-approved pharmaceutical brands. Its brands include Acetadote, Caldolor, Kristalose, Omeclamox, RediTrex, Sancuso, Vaprisol and Vibativ.

Executives

Todd M. Anthony	officer: Vice Pres Organizational Dev	1600 WEST END AVENUE, SUITE 1300, NASHVILLE TN 37203
Chris T. Bitterman	officer: Vice Pres Sales & Marketing	1600 WEST END AVENUE, SUITE 1300, NASHVILLE TN 37203
Joseph C Galante	director	111 TENTH AVENUE, SUITE 200, NASHVILLE TN 37203
James Jones	director	2525 WEST END AVE., SUITE 950, NASHVILLE TN 37203
Kenneth Krogulski	director	2525 WEST END AVENUE, SUITE 950, NASHVILLE TN 37203
Caroline Young	director	2525 WEST END AVENUE, SUITE 950, NASHVILLE TN 37203
Brown Martin S Jr	director	850 DIXIE HIGHWAY, LOUISVILLE KY 40210
A J Kazimi	director, 10 percent owner, officer: Chairman and CEO	1207 17TH AVENUE SUITE 103, NASHVILLE TN 37212
Martin E Cearnal	director	31 UPPER MOUNTAIN AVENUE, APARTMENT 2, MONTCLAIR NJ 07042
John M. Hamm	officer: Chief Financial Officer	2525 WEST END AVENUE, SUITE 950, NASHVILLE TN 37203
Gordon R Bernard	officer: Senior Vice President	2525 WEST END AVENUE, SUITE 950, NASHVILLE TN 37203
Joey A Jacobs	director	830 CRESCENT CENTER DRIVE, SUITE 610, FRANKLIN TN 37067
Michael Bonner	officer: Chief Financial Officer	2525 WEST END AVENUE, SUITE 950, NASHVILLE TN 37203
Jonathan Griggs	director	2525 WEST END AVENUE, SUITE 950, NASHVILLE TN 37203
Thomas R Lawrence	director	1880 ELLINGTON WAY, AUBURN AL 36830