What is Sprout Social 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.
Sprout Social 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
Sprout Social Business Description
Traded in Other Exchanges
N/A
Address
131 South Dearborn Street, Suite 700, Chicago, IL, USA, 60603
Sprout Social Inc develops a cloud software that brings together social messaging, data and workflows in a unified system of record, intelligence, and action. The firm generates majority revenue from software subscriptions.
Executives
| Preto Joseph Del |
officer: CFO and Treasurer |
600 WEST CHICAGO AVENUE, SUITE 850, CHICAGO IL 60610 |
| Ryan Paul Barretto |
officer: President |
C/O SPROUT SOCIAL, INC., 131 SOUTH DEARBORN AVENUE, SUITE 700, CHICAGO IL 60603 |
| Justyn Russell Howard |
director, 10 percent owner, officer: Chairman and CEO |
C/O SPROUT SOCIAL, INC., 131 SOUTH DEARBORN STREET, SUITE 700, CHICAGO IL 60603 |
| Rankin Aaron Edward Frederick |
director, 10 percent owner, officer: Chief Technology Officer |
C/O SPROUT SOCIAL, INC., 131 SOUTH DEARBORN STREET, SUITE 700, CHICAGO IL 60603 |
| Karen Walker |
director |
170 WEST TASMAN DRIVE, SAN JOSE CA 95134 |
| Raina Moskowitz |
director |
117 ADAMS STREET, C/O ETSY,INC., BROOKLYN NY 11201 |
| William Thomas Stanley |
director |
131 S DEARBORN ST, STE 700, CHICAGO IL 60603 |
| Steven A Collins |
director |
20 N. MERIDIAN STREET, SUITE 200, INDIANAPOLIS IN 46204 |
| Jamie Cannon Gilpin |
officer: Chief Marketing Officer |
C/O SPROUT SOCIAL, INC., 131 SOUTH DEARBORN STREET, SUITE 700, CHICAGO IL 60603 |
| Goldman Sachs Group Inc |
10 percent owner |
200 WEST STREET, NEW YORK NY 10282 |
| Jason Kreuziger |
director |
C/O SPROUT SOCIAL, INC., 131 SOUTH DEARBORN STREET, SUITE 700, CHICAGO IL 60603 |
| Gs Fund Holdings, L.l.c. |
10 percent owner |
200 WEST STREET, NEW YORK NY 10282 |
| New Enterprise Associates 13 Lp |
10 percent owner |
1119 ST PAUL STREET, BALTIMORE MD 21202 |
| Mbd Advisors, L.l.c. |
10 percent owner |
200 WEST STREET, NEW YORK NY 10282 |
| Bridge Street Opportunity Advisors, L.l.c. |
10 percent owner |
200 WEST STREET, NEW YORK NY 10282 |
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