Predictable companies are usually characterized by a steady record of revenue and Ebitda, which is often linked to a 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 want to consider the following three stocks, as they represent U.S. listed equities in companies that have a high rating for business predictability.
The Home Depot Inc
The first company that meets the criteria is The Home Depot Inc (HD, Financial), an Atlanta-based operator of home improvement retail stores in North America and Mexico.
The Home Depot's business has the highest score of 5 out of 5 stars for the business predictability rating. The company saw the revenue per share grow by 10.6% and the Ebitda per share grow by 16.6% on average every year over the past 10 years.
The share price ($266.19 at close on Tuesday) has grown by 659.24% over the past 10 years for a market capitalization of $286.58 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 price-earnings ratio is 23.03 versus the industry median of 22.2, the enterprise-value-to-Ebitda ratio is 15.57 versus the industry median of 12.29 and the price-sales ratio is 2.29 versus the industry median of 0.72.
As of December, Wall Street sell-side analysts recommend 12 strong buy ratings, 12 buy ratings and 9 hold ratings for the stock with an average target price of $304.82 per share.
Ping An Insurance (Group) Co. of China Ltd
The second company that matches the criteria is Ping An Insurance (Group) Co. of China Ltd (PNGAY, Financial), a Shenzhen, China-based provider of various insurance, banking and financial products and services to businesses in the People's Republic of China.
Ping An Insurance's business has a high score of 4.5 out of 5 stars for its predictability rank. The company saw the revenue per share grow by 19.9% and the Ebitda per share grow by 26.4% on average every year over the past 10 years.
The current share price ($24.23 as of Tuesday) has risen by 115.76% over the past 10 years for a market capitalization of $221.47 billion.
GuruFocus assigned a financial strength rating of 3 out of 10 and a profitability rating of 7 out of 10 to the company.
The price-earnings ratio is 12.3 compared to the industry median of 13.05, the enterprise-value-to-Ebitda ratio is 9.1 compared to the industry median of 9.06 and the price-sales ratio is 1.39 versus the industry median of 1.06.
As of December, Wall Street sell-side analysts recommend a median rating of buy with an average target price of $32.31 per share for the stock.
ASML Holding NV
The third company that makes the cut is ASML Holding NV (ASML, Financial), a Dutch developer and marketer of advanced semiconductor equipment systems for memory and logic chip manufacturers.
ASML's business has a high predictability rank of 3 out of a total of 5 stars. The company saw the revenue per share grow by 14.4% and the Ebitda per share grow by 31.6% on average every year over the past 10 years.
The current share price ($484.01 as of Tuesday) has grown by 872.1% over the past 10 years for a market capitalization of $203.04 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 price-earnings ratio is 49.91 versus the industry median of 31.34, the enterprise-value-to-Ebitda ratio is 38.6 versus the industry median of 18.28 and the price-sales ratio is 12.09 versus the industry median of 2.5.
As of December, Wall Street sell-side analysts recommend two strong buys, three buys and two hold ratings for an average target price of $424.22 per share.
Disclosure: I have no position in any security mentioned.
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