What is Sonoma Pharmaceuticals 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.
Sonoma Pharmaceuticals 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
Sonoma Pharmaceuticals (Sonoma Pharmaceuticals) Business Description
Traded in Other Exchanges
Address
5445 Conestoga Court, Suite 150, Boulder, CO, USA, 80301
Sonoma Pharmaceuticals Inc is a specialty pharmaceutical company operating in the United States. It is engaged in identifying, developing, and commercializing differentiated therapies for patients living with chronic skin conditions. The company focuses on the development and commercialization of therapeutic solutions in medical dermatology to treat skin conditions, such as acne, atopic dermatitis, and scarring. The key products of the company are Celacyn, Ceramax Skin Barrier Cream, Mondoxyne, Alevicyn, SebuDerm, Microcyn, and Microcyn which are available for various skin treatments such as scars, itchy skin, minor skin irritations, rashes, and others. The company derives revenue from the sale of products in the United States, Latin America, Europe, and other countries.
Executives
| Chad Norman White |
officer: Interim CFO |
645 MOLLY LANE, SUITE 150, WOODSTOCK GA 30189 |
| Jerome J Dvonch |
officer: Chief Financial Officer |
12701 COMMONWEALTH DRIVE, SUITE 9, FORT MYERS FL 33913 |
| Robert Grant Edwards |
officer: Chief Financial Officer |
1129 N. MCDOWELL BLVD., PETALUMA CA 94954 |
| Poggetto John Dal |
officer: Chief Financial Officer |
1129 N. MCDOWELL BLVD, PETALUMA CA 94954 |
| Amy Moss Trombly |
officer: Interim CEO |
1314 MAIN STREET, SUITE 102, LOUSIVILLE CO 80027 |
| Frederick J Sandford |
director, officer: CEO and Interim CFO |
C/O SONOMA PHARMACEUTICALS, INC., 1129 N. MCDOWELL BLVD., PETALUMA CA 94954 |
| Philippe Weigerstorfer |
director |
1129 N. MCDOWELL BLVD., PETALUMA CA 94954 |
| Robert E Miller |
officer: Chief Financial Officer |
1129 N. MCDOWELL BLVD., PETALUMA CA 94954 |
| James J Schutz |
director, officer: Chief Operating Officer |
1129 N. MCDOWELL BLVD., PETALUMA CA 94954 |
| Marc Umscheid |
officer: Chief Strategy/Mkt Officer |
OCULUS INNOVATIVE SCIENCES, INC., 1129 N. MCDOWELL BLVD., PETALUMA CA 94954 |
| Robert Allen Northey |
officer: Exec. VP of Res & Devlpment |
C/O OCULUS INNOVATIVE SCIENCES, INC., 1129 N. MCDOWELL BLVD., PETALUMA CA 94954 |
| Sharon Surrey Barbari |
director |
280 EAST GRAND AVENUE, SOUTH SAN FRANCISCO CA 94080 |
| Russell Joseph Harrison |
director |
OCULUS INNOVATIVE SCIENCES, INC., 1129 NORTH MCDOWELL BLVD., PETALUMA CA 94954 |
| John Mclaughlin |
director |
OCULUS INNOVATIVE SCIENCES, INC., 1129 N. MCDOWELL BLVD., PETALUMA CA 94954 |
| Sameer Harish |
other: Officer of Subsidiary (1) |
RUTHIGEN, INC., 1129 N. MCDOWELL BLVD, PETALUMA CA 94954 |
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