Encore Capital Group (Encore Capital Group) Predictability Rank

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What is Encore Capital Group 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.

Encore Capital Group 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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Encore Capital Group (Encore Capital Group) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Financial Services » Banks » Encore Capital Group Inc (NAS:ECPG) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

ECP:Germany

Address

350 Camino De La Reina, Suite 100, San Diego, CA, USA, 92108

Website

https://www.encorecapital.com

Encore Capital Group Inc is a specialty finance company. It provides debt recovery solutions for consumers and property owners across a broad range of financial assets. The company purchase portfolios of defaulted consumer receivables at deep discounts to face value and manage them by working with individuals as the consumer repay their obligations and work toward financial recovery. Encore has only a reportable segment being portfolio purchasing and recovery.

Executives

Jonathan C Clark	officer: Executive VP, CFO & Treasurer	300 CONTINENTAL DRIVE, NEWARK DE 19713
Laura Olle	director	350 CAMINO DE LA REINA, SUITE 100, SAN DIEGO CA 92108
John Yung	officer: President, Intl. and Cabot	350 CAMINO DE LA REINA, SUITE 100, SAN DIEGO CA 92108
William C. Goings	director	1015 A ST, TACOMA WA 98402
Andrew Eric Asch	officer: SVP, General Counsel	350 CAMINO DE LA REINA, SUITE 100, SAN DIEGO CA 92627
Ryan B Bell	officer: EVP and COO of MCM	350 CAMINO DE LA REINA, SUITE 100, SAN DIEGO, CA 92108
Gregory L. Call	officer: Sr. VP, GC & Secretary	350 CAMINO DE LA REINA, SUITE 100, SAN DIEGO CA 92108
Peter Reck	officer: Chief Accounting Officer	C/O ICAHN ENTERPRISES L.P., 767 FIFTH AVENUE, SUITE 4600, NEW YORK NY 10153
Wendy Hannam	director	350 CAMINO DE LA REINA, SUITE 100, SAN DIEGO CA 92108
Craig A. Buick	officer: Cabot Credit Management CEO	350 CAMINO DE LA REINA, SUITE 100, SAN DIEGO CA 92108
A. Knight Angela	director	350 CAMINO DE LA REINA, SUITE 100, SAN DIEGO CA 92108
Jeffrey Albert Hilzinger	director	3 CEDAR RIDGE DRIVE, CHESTER NJ 07930
Jcf Iii Europe Holdings L.p.	10 percent owner	C/O J.C. FLOWERS & CO., 767 FIFTH AVENUE, 23RD FLOOR, NEW YORK NY 10153
Ashish Masih	officer: EVP, US Debt Purchasing & Ops.	350 CAMINO DE LA REINA, SUITE 100, SAN DIEGO CA 92108
Kenneth J Stannard	officer: Cabot Credit Management CEO	350 CAMINO DE LA REINA, SUITE 100, SAN DIEGO CA 92108