Chemed (Chemed) Predictability Rank

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What is Chemed 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.

Chemed 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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Chemed (Chemed) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Healthcare » Healthcare Providers & Services » Chemed Corp (NYSE:CHE) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

CXM:Germany

Address

255 East Fifth Street, Suite 2600, Cincinnati, OH, USA, 45202-4726

Website

https://www.chemed.com

Chemed Corp operates subsidiaries in two main segments: VITAS and Roto-Rooter. The VITAS segment generates the majority of the firm's revenue. It provides hospice and palliative-care services to patients with terminal illnesses through a network of physicians, registered nurses, home health aides, social workers, and volunteers. The vast majority of the segment's revenue is received from the Medicare and Medicaid reimbursement programs. The Roto-Rooter segment provides plumbing, drain cleaning, water restoration, and related services to residential and commercial customers. Chemed generates the majority of its revenue from business in the United States.

Executives

Kevin J Mcnamara	director, officer: president & ceo	2500 CHEMED CENTER, 255 EAST FIFTH ST, CINCINNATI OH 45202
Spencer S Lee	officer: vice president	2500 CHEMED CENTER, 255 EAST FIFTH ST, CINCINNATI OH 45202
David Patrick Williams	officer: Vice President & CFO
Nicholas Michael Westfall	officer: Executive Vice President	8035 PEREGRINE LANE, CINCINNATI OH 45243
Patrick P Grace	director	1100 PARK AVE, APT 15C, NEW YORK NY 10128
Eileen P Mccarthy	director	3515 78TH STREET, #2, JACKSON HEIGHTS NY 11372
Michael D Witzeman	officer: vice president and controller	255 E 5TH STREET, SUITE 2600, CINCINNATI OH 45202
Mount John Meredith Jr.	director	2906 MABRY ROAD NE, ATLANTA GA 30319
Donald E Saunders	director	306 MIANI TRAIL, OXFORD OH 45056
Christopher J Heaney	director	101 S. FORT LAUDERDALE BEACH BLVD., APARTMENT 1602, FORT LAUDERDALE FL 33316
Ron Delyons	director	2692 MADISON ROAD, SUITE N1-313, CINCINNATI OH 45208
Naomi C Dallob	officer: VP and Chief Legal Officer	255 EAST FIFTH STREET, SUITE 2600, CINCINNATI OH 45202
Thomas C Hutton	director, officer: vice president	ONE ROCKEFELLER PLAZA, STE 1510, NEW YORK NY 10020
Walsh George J Iii	director	ONE CHASE MANHATTAN PLAZA, NEW YORK NY 10005
Andrea R Lindell	director