Denny's (Denny's) Predictability Rank

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What is Denny's 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.

Denny's 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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Denny's (Denny's) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Consumer Cyclical » Restaurants » Denny's Corp (NAS:DENN) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

DE8:Germany

Address

203 East Main Street, Spartanburg, SC, USA, 29319-9966

Website

https://investor.dennys.com

Denny's Corp is one of America's largest franchised full-service restaurant chains based on the number of restaurants. It provides Pancakes, Appetizers & Soups, Sandwiches & Salads, Breakfast Melts, Omelettes, and others. The company generates its revenue from two sources: the sale of food & beverages and the collection of royalties & fees from restaurants.

Executives

Pankaj K Patra	officer: EVP, Chief Digital & Tech Ofc	12157 BETHEL DR., FRISCO TX 75033
Stephen C. Dunn	officer: Sr. V.P., Global Development	203 EAST MAIN STREET, SPARTANBURG SC 29319
John C Miller	director, officer: CEO and President
Stephanie J. Davidson	officer: EVP, Chief People Officer	203 EAST MAIN STREET, SPARTANBURG SC 29319
Gail Sharps Myers	officer: Senior VP, General Counsel	13515 BALLANTYNE CORPORATE PLACE, CHARLOTTE NC 28277
Robert P. Verostek	officer: Senior Vice President, Finance	203 EAST MAIN STREET, SPARTANBURG SC 29319
Brenda J Lauderback	director	IRWIN FINANCIAL CORPORATION, 500 WASHINGTON STREET, COLUMBUS IN 47201
Kelli Valade	director, officer: CEO and President	6820 LBJ FREEWAY, DALLAS TX 75240
Donald C. Robinson	director	203 EAST MAIN STREET, MS P12-02, SPARTANBURG SC 29319
F Mark Wolfinger	officer: Sr. V.P., CFO	DENNY'S CORPORATION, 203 EAST MAIN STREET, SPARTANBURG SC 29319
Olufunlayo Olurinde Fajemirokun-beck	director	C/O FRESHPET, INC., 400 PLAZA DRIVE, 1ST FLOOR, SECAUCUS NJ 07094
Jay C Gilmore	officer: VP, CAO & Corporate Controller	203 EAST MAIN STREET, MSP1202, SPARTANBURG SC 29319
John William Dillon	officer: Sr VP, Chief Marketing Officer	203 EAST MAIN STREET, SPARTANBURG SC 29319
Christopher D Bode	officer: Sr. V.P., Operations	203 EAST MAIN STREET, SPARTANBURG SC 29319
Timothy E. Flemming	officer: Sr. V.P., General Counsel	203 EAST MAIN STREET, SPARTANBURG SC 29319