EPAM Systems (EPAM Systems) Predictability Rank

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What is EPAM Systems 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.

EPAM Systems 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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EPAM Systems (EPAM Systems) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Technology » Software » EPAM Systems Inc (NYSE:EPAM) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

EPAM:Mexico E3M:Germany E3M:Germany

Address

41 University Drive, Suite 202, Newtown, PA, USA, 18940

Website

https://www.epam.com

EPAM Systems is a global IT services firm that offers platform engineering, software development, and consulting services. EPAM's largest market is North America, which represents approximately 60% of revenues. Offerings span assisting companies with new technologies, such as artificial intelligence, virtual reality, and robotics.

Executives

Jason D. Peterson	officer: Chief Financial Officer	41 UNIVERSITY DRIVE SUITE 202, NEWTOWN PA 18940
Elaina Shekhter	officer: Chief Marketing Officer	860 GREAT OAKS TRAIL, EAGAN MN 55123
Eugene Roman	director	72 EDENBRIDGE DRIVE, TORONTO A6 M9A3G2
Chandra Mcmahon	director	C/O EPAM SYSTEMS, INC., 41 UNIVERSITY DRIVE SUITE 202, NEWTOWN PA 18940
Deanne Aguirre	director	C/O HERCULES CAPITAL, INC., 400 HAMILTON AVENUE, SUITE 310, PALO ALTO CA 94301
Viktar Dvorkin	officer: SVP/Head of Global Delivery	C/O EPAM SYSTEMS, INC., 41 UNIVERSITY DRIVE, SUITE 202, NEWTOWN PA 18940
Gary C Abrahams	officer: VP, Corporate Controller, PAO	41 UNIVERSITY DRIVE SUITE 202, NEWTOWN PA 18940
Balazs Fejes	officer: Chief Technology Officer	C/O EPAM SYSTEMS, INC., 41 UNIVERSITY DRIVE, SUITE 202, NEWTOWN PA 18940
Boris Shnayder	officer: SVP/Co-Head of Global Business	41 UNIVERSITY DRIVE SUITE 202, NEWTOWN PA 18940
Arkadiy Dobkin	director, 10 percent owner, officer: CEO, President, Chairman	C/O EPAM SYSTEMS, INC., 41 UNIVERSITY DRIVE, SUITE 202, NEWTOWN PA 18940
Lawrence F Solomon	officer: SVP & Chief People Officer	41 UNIVERSITY DRIVE SUITE 202, NEWTOWN PA 18940
Ronald P Vargo	director	41 UNIVERSITY DRIVE, SUITE 202, NEWTOWN PA 18940
Robert E. Segert	director	C/O EPAM SYSTEMS, INC., 41 UNIVERSITY DRIVE, SUITE 202, NEWTOWN PA 18940
Karl Robb	director, officer: Pres. of EU Operations, EVP	C/O EPAM SYSTEMS, INC., 41 UNIVERSITY DRIVE, SUITE 202, NEWTOWN PA 18940
Sergey Yezhkov	officer: SVP/Co-Head of Global Business	C/O EPAM SYSTEMS, INC., 41 UNIVERSITY DRIVE, SUITE 202, NEWTOWN PA 18940