InnerWorkings Predictability Rank Definition
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.
InnerWorkings 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
Also read:
Part II: What worked in the market from 1998-2008? Part II: Role of Valuations
Part III: Intrinsic Value, Discounted Cash Flow and Margin of Safety
InnerWorkings (InnerWorkings) Business Description
Traded in Other Exchanges
N/A
Address
203 North LaSalle Street, Suite 1800, Chicago, IL, USA, 60601
InnerWorkings Inc is a marketing supply-chain company that provides marketing solutions, such as advertising materials, branded merchandise, product packaging, and retail displays. The company has three geographical reportable segments namely North America, EMEA, and LATAM. It generates maximum revenue from North America segment. The company operates a software platform called VALO that enables customers to a source, produce, monitor, and analyze their marketing plan with the company.
Executives
| Richard S Stoddart |
director, officer: President and CEO |
C/O HASBRO, INC., 1011 NEWPORT AVENUE, PAWTUCKET RI 02861 |
| Adan Pope |
officer: Chief Technology Officer |
203 NORTH LASALLE CHICAGO IL 60601 |
| Renae Chorzempa |
officer: Chief Human Resources Officer |
C/O INNERWORKINGS, INC. 600 WEST CHICAGO AVENUE CHICAGO IL 60654 |
| Oren B. Azar |
officer: EVP and General Counsel |
600 WEST CHICAGO AVE #850 CHICAGO IL 60654 |
| Marc Zenner |
director |
1000 LOUISIANA STREET, SUITE 3850, HOUSTON TX 77002 |
| Ronald Provenzano |
officer: Head of Operations |
C/O INNERWORKINGS, INC. 600 W. CHICAGO AVE. #850 CHICAGO IL 60654 |
| Lindsay Y Corby |
director |
180 NORTH LASALLE STREET, SUITE 300, CHICAGO IL 60601 |
| Charles K Bobrinskoy |
director |
C/O INNERWORKINGS, INC., 600 WEST CHICAGO AVENUE, SUITE 850, CHICAGO IL 60654 |
| Donald W Pearson |
officer: Executive VP and CFO |
425 N. MARTINGALE ROAD SUITE 2050 SCHAUMBURG IL 60173-2213 |
| John Bosshart |
officer: Chief Accounting Officer |
500 W. MADISON STREET, #1000, CHICAGO IL 60661 |
| David Fisher |
director |
39 SOUTH LASALLE STREET, SUITE 220, CHICAGO IL 60605 |
| Julie Howard |
director |
MANPOWERGROUP INC., 100 MANPOWER PLACE, MILWAUKEE WI 53212 |
| Adam J Gutstein |
director |
875 N. MICHIGAN AVE. STE 3000 CHICAGO IL 60611 |
| Jack M Greenberg |
director |
333 WEST WACKER DR, CHICAGO IL 60606 |
| Kirt P Karros |
director |
12400 HIGH BLUFF DR. SUITE 600, SAN DIEGO CA 92130 |
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