An investment strategy based on a “buy and hold” approach has more chance to be successful if the business is predictable. Such companies typicall have a consistent history of revenue per share and Ebitda per share, which often correlates with strong long-term performance based on a 10-year study that GuruFocus conducted for the period from 1998 to 2008.
In light of the above, value investors may be interested in the following three companies, as they have high GuruFocus business predictability ratings.
W.W. Grainger Inc
The first company that qualifies is W.W. Grainger Inc (GWW, Financial), a Lake Forest, Illinois-based distributor of maintenance, repair and operating products in North America and internationally.
W.W. Grainger Inc’s business has the highest business predictability rating of 5 out of 5 stars. The company saw the revenue per share grow by 8.2%, the Ebitda per share grow by 3.8% and the stock price grow by 7.2% on average every year over the past 10 years.
The share price ($333.32 as of July 16) has grown 218% over the past 10 years for a market capitalization of $17.82 billion.
GuruFocus assigned a financial strength rating of 6 out of 10 and a profitability rating of 9 out of 10 to the company.
The stock is not cheap, as the price-earnings ratio is 23.83 versus the industry median of 12.95, the price-book ratio is 9.85 versus the industry median of 0.9 and the price-sales ratio is 1.55 versus the industry median of 0.41.
Brown-Forman Corp
The second company that qualifies is Brown-Forman Corp (BF.A, Financial) (BF.B, Financial), a Louisville, Kentucky-based manufacturer, import/export trader and seller of alcoholic beverages.
Brown-Forman’s business has the highest 5-star business predictability rank. The company saw the revenue per share increase by 3.9%, the Ebitda per share increase by 0.8% and the stock price increase by 9.5% (class A stock) and 12.4% (class B Stock) per year on average over the past 10 years.
Class A common stock:
Class B common stock:
The share price of $61.63 for class A stock and of $66.72 for class B stock (as of July 16) have grown by 276.7% and 311.3%, respectively, over the past 10 years for a market capitalization of about $31.05 billion.
GuruFocus assigned a financial strength rating of 5 out of 10 and a profitability rating of 9 out of 10 to the company.
The stock has a price-earnings ratio of 38.57 versus the industry median of 21.11, a price-book ratio of 16.15 versus the industry median of 1.82 and a price-sales ratio of 9.53 versus the industry median of 1.87. Thus, the stock is currently not trading cheaply.
CorVel Corp
The third company that qualifies is CorVel Corp (CRVL, Financial), an Irvine, California-based provider of workers' compensation solutions for a broad range of private and public companies and organizations.
CorVel Corp’s business has a high predictability rank of 4.5 out of five stars. The company saw the revenue per share grow by 6.7%, the Ebitda per share grow by 8.5% and the stock price grow by 12% per year on average over the past 10 years.
The share price ($78.14 as of July 16) has grown 323.3% over the past 10 years for a market capitalization of $1.41 billion.
GuruFocus assigned a financial strength rating of 6 out of 10 and a profitability rating of 9 out of 10 to the company.
The stock is not at its cheapest, as the price-earnings ratio is 30.76 versus the industry median of 10.96, the price-book ratio is 7.4 versus the industry median of 0.98 and the price-sales ratio is 2.45 versus the industry median of 0.9.
Disclosure: I have no position in any security mentioned.
Read more here:
- 3 Capital Intensive Stocks for the Value Investor
- This Trio Is Trading Below the Peter Lynch Earnings Line
- A Trio of Picks for the Value Investor
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