What is Apptio Predictability Rank?
Not Rated
Warren Buffett said many times that the companies he likes are:
1. Simple businesses that he understands
2. that have predictable and proven earnings and
3. with economic moat
4. those can be bought at a reasonable price.
It is hard to quantify "simple businesses that he (Buffett) understands", so we will focus on the other three characteristics instead. In GuruFocus Research: What worked in the market from 1998-2008? Part I: Introduction of Predictability Rank, we will show that the businesses that have predictable and proven earnings are usually also simple businesses that an average person could understand.
GuruFocus conducted a back test study of Warren Buffett's strategy of "buying good companies at fair prices" for the years from 1998-2008.
Apptio Predictability Rank Calculation
In our database there are 2403 stocks that have been traded from Jan. 2, 1998 to Aug. 31, 2008. We have the complete 10-year financial data and trading prices of these companies for this period. We rank the predictability of these companies based on the consistency of their revenue per share and EBITDA (earning before interest, tax, depreciation and amortization) per share over the past ten fiscal years, and study the correlation between the stock performances and the predictability of the business.
Our study may be subject to these biases and assumptions:
Dividend yields are not counted for investment returns
Effects of price changes due to spin-offs may not be fully adjusted
Study is subjected to survivorship bias due to de-listing, bankruptcy, LBO, M&A, etc.
The correlation between business predictability and investment returns of a company is showed below.
Correlation Between Business Predictability and Investment Returns
| Predictables | Non-Predictable | All stocks |
|---|
| Total Number of stocks | 570 | 1833 | 2403 |
| Total Lost Money | 61 | 830 | 891 |
| Total Lost More Than 50% | 18 | 412 | 430 |
| Total Lost More Than 90% | 4 | 86 | 90 |
| Average Gain | 260.6% | 100.0% | 138.1% |
| Median Gain | 150.0% | 13.0% | 39.0% |
| Maximum Gain | 2852.0% | 11483.0% | 11483.0% |
| Maximum Loss | -100.0% | -100.0% | -100.0% |
| Annualized Average Gain | 12.7% | 6.7% | 8.4% |
| Annualized Median Gain | 8.9% | 1.1% | 3.1% |
For the 570 predictable companies, we have seen strong correlation between the predictability of businesses and the stock performances over the past 10 years, regardless of the valuation of business at 1998. Accordingly, we have ranked the business predictability from 5-star to 1-star, as shown in this table.
| Predictability Rank | 5-Star | 4.5-Star | 4-Star | 3.5-Star | 3-Star | 2.5-Star | 2-Star | 1-Star (non-predictable) | Average among all |
|---|
| % Out of All 2403 Stocks |
3.3% |
2.9% |
3.7% |
3.3% |
3.3% |
3.7% |
3.3% |
76.3% |
100% |
| % that are in Loss (10y) |
3% |
10% |
8% |
9% |
11% |
18% |
16% |
45% |
37% |
| Average Gain (10y) |
364.6% |
330.9% |
278.0% |
235.1% |
243.5% |
227.8% |
154.8% |
100.0% |
138.1% |
| Median Gain (10y) |
238.5% |
193.5% |
171.0% |
159.0% |
132.5% |
113.5% |
87.0% |
13.0% |
39.0% |
| Maximum Gainer |
2228.0% |
2547.0% |
2452.0% |
2852.0% |
2432.0% |
1892.0% |
1807.0% |
11483.0% |
11483.0% |
| Maximum Loser |
-82.0% |
-53.0% |
-67.0% |
-100.0% |
-83.0% |
-100.0% |
-78.0% |
-100.0% |
-100.0% |
| Annualized Average Gain |
15.4% |
14.6% |
13.2% |
12.0% |
12.2% |
11.7% |
9.1% |
6.7% |
8.4% |
| Annualized Median Gain |
12.1% |
10.6% |
9.8% |
9.3% |
8.2% |
7.3% |
6.0% |
1.1% |
3.1% |
For detailed information about each predictability rank, please go to GuruFocus Research: What worked in the market from 1998-2008? Part I: Introduction of Predictability Rank
Also read:
Part II: What worked in the market from 1998-2008? Part II: Role of Valuations
Part III: Intrinsic Value, Discounted Cash Flow and Margin of Safety
Apptio (Apptio) Business Description
Traded in Other Exchanges
N/A
Address
Apptio Inc develops and sells Technology Business Management or TGM solutions. Its cloud-based platform and SaaS applications enable IT leaders to analyze, optimize and plan technology investment and benchmark financial and operational performance against peers. It empowers IT leaders to transform IT into a service provider, to navigate the cloud transition, and to shift technology resources to drive more business innovation. The company operates in the United States, the United Kingdom, Germany, Denmark, Netherlands, Australia, Canada, France and Singapore.
Executives
| Rebecca Jacoby |
director |
170 WEST TASMAN DRIVE, SAN JOSE CA 95134 |
| Thomas F Bogan |
director |
C/O WORKDAY, INC., 6110 STONERIDGE MALL RD, PLEASANTON CA 94588 |
| John Mcadam |
director |
|
| Peter S Klein |
director |
C/O MICROSOFT CORPORATION, ONE MICROSOFT WAY, REDMOND WA 98052-6399 |
| Kathleen Philips |
director |
256 30TH AVENUE, SAN FRANCISCO CA 94121 |
| Matthew S Mcilwain |
director |
1000 SECOND AVENUE, SUITE 3700, SEATTLE WA 98104 |
| Rajeev Singh |
director |
6222 185TH AVENUE NE, REDMOND WA 98052 |
| Ravi Mohan |
director |
C/O SHASTA VENTURES 2440 SAND HILL ROAD, SUITE 300 MENLO PARK CA 94025 |
| Madrona Venture Fund Iii-a Lp |
other: Former 10% Owner |
1000 SECOND AVE, SUITE 3700, SEATTLE WA 98104 |
| Madrona Venture Fund Iii L P |
other: Former 10% Owner |
1000 SECOND AVE, SUITE 3700, SEATTLE WA 98104 |
| Madrona Investment Partners Iii |
other: Former 10% Owner |
999 THIRD AVE, 34TH FLOOR, SEATTLE WA 98104 |
| Greylock Xii Gp Llc |
10 percent owner |
2550 SAND HILL ROAD, SUITE 200, MENLO PARK CA 94025 |
| Greylock Xii Limited Partnership |
10 percent owner |
40 GROVE STREET, SUITE 430, WELLESLEY MA 02482 |
| Greylock Xii-a Limited Partnership |
10 percent owner |
40 GROVE STREET, SUITE 430, WELLESLEY MA 02482 |
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