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James Li
James Li
Articles (638)  | Author's Website |

Value Screeners Identify Good Predictable Companies

A deeper understanding of business predictability

Even though the U.S. stock market remains significantly overvalued, GuruFocus’ value screeners can still identify companies with high business predictability. At least nine companies made both the Undervalued Predictable Screener and the Buffett-Munger Screener as of March 9, including NIC Inc. (NASDAQ:EGOV), Alliance Data Systems Corp. (NYSE:ADS) and Manhattan Associates Inc. (NASDAQ:MANH).

Brief summary of business predictability and its importance to value investing

As discussed in a research article, the GuruFocus business predictability rank considers a company’s historical revenue and earnings trends from the past 10 years. Based on the consistency of its revenue and earnings growth, the company can receive a star rank between one and five.

We can draw a predictability chart to briefly understand why a company received a specific rank. Figure 1 shows the predictability chart of Sears Holdings Corp. (SHLD) while Figure 2 shows the predictability chart of Ross Stores Inc. (NASDAQ:ROST).

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Figure 1: SHLD Predictability Chart (Predictability Rank 1)

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Figure 2: ROST Predictability Chart (Predictability Rank 4.5)

We can clearly see Sears has declining revenue and earnings based on Figure 1. On the other hand, Ross Stores has a significantly more consistent revenue and earnings trend, and thus gets a higher predictability rank.

Warren Buffett (Trades, Portfolio) championed the idea of business predictability, labeling it as one of his four key investing criteria. Our model portfolios based on the undervalued predictable and Buffett-Munger strategies have outperformed the S&P 500 benchmark in at least six of the past seven years.

Table 1 lists nine companies that made both the Undervalued Predictable Screener and Buffett-Munger Screener as of March 9.

Alliance Data Systems Corp. (NYSE:ADS)

NIC Inc. (NASDAQ:EGOV)

CGI Group Inc. (NYSE:GIB)

Intercontinental Exchange Inc. (NYSE:ICE)

Multi-Color Corp. (NASDAQ:LABL)

Manhattan Associates Inc. (NASDAQ:MANH)

Old Dominion Freight Lines Inc. (NASDAQ:ODFL)

Bank of the Ozarks Inc. (OZRK)

Ulta Beauty Inc. (ULTA)

Table 1

See also

Table 2 summarizes the value screener record as of March 9.

Screener Name

USA

Canada

UK / Ireland

Europe

Asia

Oceania

Latin America

Africa

Ben Graham Net-Net

119

80

36

201

478

22

3

9

Undervalued Predictable

60

8

28

70

41

6

20

5

Buffett-Munger

31

8

15

44

68

3

11

3

Historical Low Price-Sales

8

2

7

18

41

0

8

5

Historical Low Price-Book

10

4

14

30

71

0

16

6

Peter Lynch Growth

31

6

20

57

70

3

21

8

Walter Schloss

13

25

29

140

314

14

14

7

Table 2

GuruFocus offers a wide variety of features to its Premium members, including access to top value screens and the All-in-one Guru Screener.

We also introduced a feature where you can interact with company filings from the Securities and Exchange Commission. Known as the FilingWiz, this feature allows you to compare data tables from the latest period to a previous period.

Disclosure: I do not have positions in the stocks mentioned.

About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


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dhonibabu
Dhonibabu - 8 months ago    Report SPAM

nice post admin

vidmate for blackberry

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