Based on a 10-year study that GuruFocus conducted for the period from 1998 to 2008, we can define predictable businesses as enterprises where a consistent growth in their revenue per share and Ebitda per share is reflected in a strong long-term performance of the stocks.
Thus, stocks with a high GuruFocus business predictability rating could boost your chances of success with a "buy and hold" approach. Value investors may be interested in the following three companies, as they have high business predictability ratings.
Fiserv Inc
The first company that makes the cut is Fiserv Inc (FISV, Financial), a Brookfield, Wisconsin-based global provider of financial services technology.
Fiserv Inc's business has a business predictability rating of 3 out of 5 stars. The company saw the revenue per share grow by 8.6% and the Ebitda per share grow by 10% on average every year over the past 10 years.
The share price ($101.81 at close on Thursday) has climbed 636.15% over the past 10 years for a market capitalization of $68.18 billion.
GuruFocus assigned a financial strength rating of 4 out of 10 and a profitability rating of 8 out of 10 to the company.
The price-earnings ratio is 80.61 versus the industry median of 31.7, the enterprise-value-to-Ebitda ratio is 19.22 versus the industry median of 16.74 and the price-sales ratio is 4.71 versus the industry median of 2.72.
As of October, Wall Street gives the stock has six strong buys, one buy and 16 hold recommendation ratings for an average target price of $126.91 per share.
Mastercard Inc
The second company that meets the criteria is Mastercard Inc (MA, Financial), a credit card services giant based in Purchase, New York.
Mastercard Inc's business has the highest score of 5 stars for its predictability rank. The company saw the revenue per share grow by 15.3% and the Ebitda per share grow by 17.4% on average every year over the past 10 years.
The current share price ($338.57 as of Thursday) represents a more than 14-fold increase from 10 years ago for a market capitalization of $338.93 billion.
GuruFocus assigned a financial strength rating of 6 out of 10 and a profitability rating of 10 out of 10 to the company.
The price-earnings ratio is 46.83 versus the industry median of 12.32, the enterprise-value-to-Ebitda ratio is 35.58 compared to the industry median of 13.92 and the price-sales ratio is 21.14 versus the industry median of 2.1.
As of October, Wall Street gives the stock has 14 strong buys, 20 buys, four holds and one underperform rating. The average target price is $361.47 per share.
Tencent Holdings Ltd
The third company that qualifies is Tencent Holdings Ltd (TCEHY, Financial), a Chinese multinational conglomerate that holds several subsidiaries that specialize in a broad range of internet-related services and products as well as artificial intelligence and technology.
Tencent Holdings Ltd's business has the highest predictability rank of 5 stars. The company saw the revenue per share grow by 39.4% and the Ebitda per share grow by 37.3% on average every year over the past 10 years.
The current share price ($71.95 as of Thursday) is almost 19 times what it was 10 years ago. The market capitalization is $689.43 billion.
GuruFocus assigned a financial strength rating of 6 out of 10 and a profitability rating of 10 out of 10 to the company.
The price-earnings ratio is 46.59 versus the industry median of 33.01, the enterprise-value-to-Ebitda ratio is 37.54 versus the industry median of 18.06 and the price-sales ratio is 11.31 compared to the industry median of 3.95.
As of October, on Wall Street, the stock has a medium recommendation rating of buy and an average target price of about $77.50 per share.
Disclosure: I have no position in any security mentioned.
Read more here:
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- 3 Stocks Trading Below the Earnings Power Value
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