SOTK (Sono-Tek) Predictability Rank

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What is Sono-Tek Predictability Rank?

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.

Sono-Tek 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

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Sono-Tek Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Technology » Hardware » Sono-Tek Corp (NAS:SOTK) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

N/A

Address

2012 Route 9W, Milton, NY, USA, 12547

Website

https://www.sono-tek.com

Sono-Tek Corp designs and manufactures ultrasonic coating systems that apply precise, thin film coatings to a multitude of products for the microelectronics/electronics, alternative energy, medical, and industrial markets, including specialized glass applications in construction and automotive. It sells products to emerging research and development and other markets. Its ultrasonic nozzle systems use high-frequency, ultrasonic vibrations that atomize liquids into minute drops that can be applied to surfaces at low velocity providing thin layers of protective materials over a surface such as glass or metals.

Executives

Stephen James Bagley	officer: Chief Financial Officer	SONO-TEK CORPORATION, 2012 ROUTE 9W, MILTON NY 12547
Christopher L Coccio	director, officer: CEO & President	SONO-TEK CORP, 2012 RT 9W, MILTON NY 12547
Joseph Riemer	officer: Vice President of Engineering	SONO-TEK CORP, 2012 RT 9W, MILTON NY 12547
Robb William Engle	officer: VP	164 LUCAS AVENUE, KINGSTON NY 12401
Philip A Strasburg	director, officer: Treasurer	19380 CEDAR GLEN DR., BOCA RATON FL 33434
Christopher Cichetti	officer: Vice President	SONO-TEK CORP., 2012 RT 9W, MILTON NY 12547
Maria T Kuha	officer: VP	9 SUNRISE DRIVE, MILTON NY 12547
Carol A O'donnell	director	540 JOAN DRIVE, FAIRFILED CT 06824-2207
Eric Haskell	director	518 CANDACE LANE, VILLANOVA PA 19085
Samuel Schwartz	director, 10 percent owner, other: Chairman	877 ROUTE 9W, UPPER GRANDVIEW NY 10960
Bennett Bruntil	officer: Vice President	351 DUBOIS ROAD, NEW PALTZ NY 12561
Handler Edward J Iii	director	31 HANCOCK LANE, DARIEN CT 06820-2511
R Stephen Harshbarger	officer: Vice President of Sales	ROUTE 22, PAWLING NY 12564
Donald F Mowbray	director	103 JENKINS ROAD, BURNT HILLS NY 12027
Norwood Venture Corp	other: Former 10% Owner	174 DEZENZO LANE, WEST ORANGE NJ 07052