The GuruFocus business predictability rating ranks companies on a five-star scale, with the more predictable companies defined as enterprises with consistent growth in their revenue per share and Ebitda per share, which caused a strong long-term performance of their stock prices in the past.
Thus, stocks with a high GuruFocus business predictability rating could enhance the success of a "buy and hold" approach. Value investors may be interested in the following three companies, as they have high business predictability ratings.
Taiwan Semiconductor Manufacturing Co Ltd
The first company that makes the cut is Taiwan Semiconductor Manufacturing Co Ltd (TSM, Financial), a Taiwanese global distributor of integrated circuits.
Taiwan Semiconductor Manufacturing's business has a good business predictability rating of 3 out of 5 stars. The company saw the revenue per share grow by 13.7% and the Ebitda per share grow by 14.9% on average every year over the past 10 years.
The share price ($99.50 at close on Thursday) has risen 736.84% over the past 10 years for a market capitalization of $516.01 billion.
GuruFocus assigned a financial strength rating of 8 out of 10 and a profitability rating of 9 out of 10 to the company.
The price-earnings ratio is 26.34 versus the industry median of 29.56, the enterprise-value-to-Ebitda ratio is 14.78 versus the industry median of 16.83 and the price-sales ratio is 9.99 versus the industry median of 2.41.
As of December, Wall Street sell-side analysts recommend one strong buy and five hold ratings for the company for an average target price of $86.35 per share.
Visa Inc
The second company that holds the criteria is Visa Inc (V, Financial), a credit card services giant based in San Francisco.
Visa's business has the highest score of 5 stars for its predictability rank. The company saw the revenue per share grow by 14.3% and the Ebitda per share grow by 15.9% on average every year over the past 10 years.
The current share price ($208.05 as of Thursday) has increased by 962.56% over the past 10 years for a market capitalization of $457.94 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 price-earnings ratio is 42.63 compared to the industry median of 13.05, the enterprise-value-to-Ebitda ratio is 31.13 compared to the industry median of 20.24 and the price-sales ratio is 21.18 versus the industry median of 2.36.
As of December, Wall Street sell-side analysts recommend 13 strong buys, 22 buys and four hold ratings for the stock with an average target price of $227.26 per share.
Johnson & Johnson
The third company that qualifies is Johnson & Johnson (JNJ, Financial), a New Brunswick, New Jersey-based drug giant.
Johnson & Johnson's business has a high predictability rank of 4 out of a total of 5 stars. The company saw the revenue per share grow by 3.2% and the Ebitda per share grow by 4.3% on average every year over the past 10 years.
The current share price ($149 as of Thursday) has increased by 139.55% over the past year for a market capitalization of $392.25 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 price-earnings ratio is 23.43 versus the industry median of 24.5, the enterprise-value-to-Ebitda ratio is 15.14 versus the industry median of 14.83 and the price-sales ratio is 4.92 versus the industry median of 2.76.
As of December, Wall Street sell-side analysts recommend four strong buys, eight buys, eight holds, two underperform ratings and one sell rating for the stock. The average target price is $166.18 per share.
Disclosure: I have no position in any security mentioned.
Read more here:
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- A Trio of High Return on Equity Ratio Stock Picks to Consider
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