A “buy and hold” approach has a high likelihood to be successful if the business is predictable. Such companies mostly have a steady record of growth in revenue per share and Ebitda per share, which often correlates with a strong long-term performance based on a 10-year study that GuruFocus conducted for the period from 1998 to 2008.
Thus, value investors may want to consider the following three companies, as they have high GuruFocus business predictability ratings.
Paychex Inc
The first company that makes the cut is Paychex Inc (PAYX, Financial), a Rochester, New York-based staffing and employment services company.
Paychex Inc’s business has a high business predictability rating of 4 out of 5 stars. The company saw the revenue per share increase by 8.4%, the Ebitda per share increase by 7.6% and the stock price increase by 10.1% on average every year over the past 10 years.
The share price ($72.76 as of Aug. 3) has grown nearly 182% over the past 10 years for a market capitalization of $26.10 billion.
GuruFocus assigned a financial strength rating of 7 out of 10 and a profitability rating of 9 out of 10 to the company.
The stock is not trading cheaply, as the price-earnings ratio is 23.95 versus the industry median of 15.93, the price-book ratio is 9.43 compared to the industry median of 1.59 and the price-sales ratio is 6.51 versus the industry median of 0.86.
McCormick & Co Inc
The second company that qualifies is McCormick & Co Inc (MKC, Financial), a Hunt Valley, Maryland-based manufacturer and distributor of flavor products to the food industry.
McCormick & Co Inc’s business has a very high score of 4 stars out of 5 for the business predictability rank. The company saw the revenue per share rise by 4.8%, the Ebitda per share rise by 11.3% and the stock price rise by 18.4% per year on average over the past 10 years.
The share price ($196.29 at close on Monday) has grown 395.4% over the past 10 years for a market capitalization of $26.15 billion.
GuruFocus assigned a financial strength rating of 4 out of 10 and a profitability rating of 9 out of 10 to the company.
The stock is not trading cheaply at the moment, as signaled by a price-earnings ratio of 35.31 (compared to the industry median of 19.4), a price-book ratio of 7.17 (versus the industry median of 1.4) and a price-sales ratio of 4.86 (compared to the industry median of 0.9).
WEC Energy Group Inc
The third company that meets the above listed criteria is WEC Energy Group Inc (WEC, Financial), a Milwaukee, Wisconsin-based provider of natural gas, electricity and renewable energy services in the U.S.
WEC Energy Group Inc’s business has a high predictability rank of 4 out of 5 stars. The company saw the revenue per share grow by 2.1%, the Ebitda per share grow by 3.6% and the stock price grow by 11.5% per year on average over the past 10 years.
The share price ($93.64 as of Aug. 3) has grown 237.7% over the past 10 years for a market capitalization of $29.54 billion.
GuruFocus assigned a financial strength rating of 3 out of 10 and a profitability rating of 8 out of 10 to the company.
The price-earnings ratio is 25.45 versus the industry median of 16.96, the price-book ratio is 2.85 compared to the industry median of 1.46 and the price-sales ratio is 4.09 versus the industry median of 1.34.
Disclosure: I have no position in any security mentioned.
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