Brinker International (Brinker International) Predictability Rank

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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.

Brinker International 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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Brinker International (Brinker International) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Consumer Cyclical » Restaurants » Brinker International Inc (NYSE:EAT) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

BKJ:Germany

Address

3000 Olympus Boulevard, Dallas, TX, USA, 75019

Website

https://www.brinker.com

Brinker International Inc operates casual dining restaurants under the brand's Chili Grill and Bar (Chili's) and Maggiano's Little Italy (Maggiano's). Chili's falls in the Bar and Grill category of casual dining. Its menu features Fresh Mex and Fresh Tex favorites including signature items such as slow-smoked baby back ribs, craft burgers, fajitas, and bottomless chips and salsa paired with tableside guacamole. Maggiano's is an Italian restaurant brand with a full lunch and dinner menu offering chef-prepared, such as appetizers, chicken, seafood, veal and prime steaks, and desserts. The company generates maximum revenue from Chili's segment.

Executives

Joseph G Taylor	officer: VP, Corp. Affairs & Inv. Rel.	6820 LBJ FREEWAY, DALLAS TX 75240
Douglas N. Comings	officer: SVP & COO, Chili's Grill & Bar	3000 OLYMPUS DR., DALLAS TX 75019
James M Butler	officer: SVP Chief Supply Chain Officer	3000 OLYMPUS BLVD., DALLAS TX 75019
Wade Allen	officer: SVP & Chief Digital Officer	6820 LBJ FREEWAY, DALLAS X1 75240
Steve Provost	officer: Pres., Maggiano's Little Italy	4024 COLGATE, UNIVERSITY PARK TX 75225
Rick Badgley	officer: SVP & Chief People Officer	6820 LBJ FREEWAY, DALLAS TX 75240
George S Felix	officer: SVP, Chief Marketing Officer	3000 OLYMPUS BLVD., DALLAS TX 75019
Kevin Hochman	director, officer: Pres. & CEO & Pres. of Chili's	3000 OLYMPUS BLVD., DALLAS TX 75019
Prashant Ranade	director	507 PLYMOUTH AVENUE, NE, GRAND RAPIDS MI 49505
Wyman Roberts	officer: SVP, Maggiano's President	3853 WATERCREST DRIVE, LONGWOOD FL 32779
Ramona Hood	director	3000 OLYMPUS BLVD., DALLAS TX 75019
Daniel S Fuller	officer: SVP, General Counsel & Sec.	120 HOLLYWOOD DR., COPPELL TX 75019
Harriet Edelman	director
Charles A Lousignont	officer: SVP Supply Chain Mgmt	6820 LBJ FREEWAY, DALLAS TX 75240
Joseph Michael Depinto	director	C/O OFFICEMAX INCORPORATED, NAPERVILLE IL 60563