HealthStream (HealthStream) Predictability Rank

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What is HealthStream 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.

HealthStream 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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HealthStream (HealthStream) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Healthcare » Healthcare Providers & Services » HealthStream Inc (NAS:HSTM) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

HL5:Germany

Address

500 11th Avenue North, Suite 1000, Nashville, TN, USA, 37203

Website

https://www.healthstream.com

HealthStream Inc provides workforce and provider solutions for healthcare organizations. Its reportable segments include Workforce Solutions and Provider Solutions. Workforce development solutions consist of SaaS, subscription-based products that are used by healthcare organizations. Its Provider Solutions products offer healthcare organizations software applications for administering and tracking provider credentialing, privileging, call center and enrollment activities. The company generates a majority of its revenue from the Workforce solutions segment.

Executives

Amir Alex Jahangir	director	500 11TH AVENUE NORTH, SUITE 1000, NASHVILLE TN 37203
J Edward Pearson	officer: Senior Vice President
Tate Deborah Taylor	director	209 10TH AVENUE SOUTH, SUITE 450, NASHVILLE TN 37203
Jeffrey L Mclaren	director	209 10TH AVE SOUTH STE 450, NASHVILLE TN 37203
Michael Scott Mcquigg	officer: Senior VP, hStream Solutions	209 10TH AVENUE SOUTH, SUITE 450, NASHVILLE TN 37203
Terry Allison Rappuhn	director	P O BOX 58062, NASHVILLE TN 37205
Frank Gordon	director	3102 WEST END AVE., SUITE 650, NASHVILLE TN 37203
Frist Robert A Jr	10 percent owner, officer: CEO	211 CRAIGHEAD AVE, NASHVILLE TN 37205
Scott Fenstermacher	officer: Senior Vice President	500 11TH AVENUE NORTH, SUITE 1000, NASHVILLE TN 37203
Linda Rebrovick	director	511 UNION STREET, SUITE 1900, NASHVILLE TN 37219
C Martin Harris	director
Scott Alexander Roberts	officer: Interim CFO	209 10TH AVENUE SOUTH, SUITE 450, NASHVILLE TN 37203
Trisha L Coady	officer: SVP & GM, Clinical Solutions	209 10TH AVENUE SOUTH, SUITE 450, NASHVILLE TN 37203
Hayden Gerard M Jr	director	C/O PRIVATE BUSINESS INC, P O BOX 1603, BRENTWOOD TN 37024
Michael Sousa	officer: Senior Vice President	209 10TH AVENUE SOUTH, SUITE 450, NASHVILLE TN 37203