ChannelAdvisor (ChannelAdvisor) Predictability Rank

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What is ChannelAdvisor Predictability Rank?

Not Rated

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.

ChannelAdvisor 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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ChannelAdvisor (ChannelAdvisor) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Technology » Software » ChannelAdvisor Corp (NYSE:ECOM) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

N/A

Address

3025 Carrington Mill Boulevard, Suite 500, Morrisville, NC, USA, 27560

Website

https://www.channeladvisor.com

ChannelAdvisor Corp is a provider of Software-as-a-Service solutions for retailers and manufacturers. Its solutions enable clients to integrate and manage its merchandise sales across multiple online channels and are offered on the firm's cloud-based platform. These solutions include inventory availability, pricing optimization, and data analytics capabilities. The company derives revenue from subscription fees to its Software-as-a-Service platform, which is typically sold on an annual basis. A majority of the firm's revenue is generated in the United States, but it has a presence in countries across the world.

Executives

M Scot Wingo	director, officer: Chief Executive Officer	3000 AERIAL CTR, STE 110, MORRISVILLE NC 27560
Timothy V Williams	director	3100 MAIN STREET, STE 900, HOUSTON TX 77002
Himanshu Palsule	director	C/O CHANNELADVISOR, INC., 3025 CARRINGTON MILL BOULEVARD, MORRISVILLE NC 27560
Janet Raye Cowell	director	C/O COOLEY LLP, 11951 FREEDOM DRIVE, SUITE 1600, RESTON VA 20190
Linda M. Crawford	director	3365 CLAY STREET, SAN FRANCISCO CA 94118
Joseph L Cowan	director	9715 KEY WEST AVENUE, ROCKVILLE MD 20850
Marshall Heinberg	director	1 CORPORATE AVENUE, ROWVILLE C3 3178
Elizabeth Segovia	officer: Chief Operating Officer	C/O CHANNELADVISOR CORPORATION, 3025 CARRINGTON MILL BOULEVARD, STE 500, MORRISVILLE VA 27560
Timothy Buckley	director	C/O RED HAT, INC, 1801 VARSITY DRIVE, RALEIGH NC 27606
David J Spitz	officer: President and COO	C/O CHANNELADVISOR CORPORATION, 2701 AERIAL CENTER PARKWAY, MORRISVILLE NC 27568
Marc Huffman	director	C/O NETSUITE INC., 2955 CAMPUS DRIVE, SUITE 100, SAN MATEO CA 94403
Richard Cornetta	officer: Chief Accounting Officer	C/O CHANNELADVISOR CORPORATION, 3025 CARRINGTON MILL BOULEVARD, MORRISVILLE NC 27560
Mark Cook	officer: Chief Financial Officer	C/O CHANNELADVISOR CORPORATION, 3025 CARRINGTON MILL BOULEVARD, RALEIGH NC 27601
Patrick J Kerins	director, 10 percent owner
Diana Semel Allen	officer: VP and General Counsel	C/O CHANNELADVISOR CORPORATION, 2701 AERIAL CENTER PARKWAY, MORRISVILLE NC 27560