Five9 (FIVN) Predictability Rank

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What is Five9 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.

Five9 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

Five9 Predictability Rank Related Terms

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Five9 (FIVN) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Technology » Software » Five9 Inc (NAS:FIVN) » Definitions » Predictability Rank

Comparable Companies

TDC SQSP HCP ESMT EEFT WIX S BOX RELY TENB MSFT ORCL ADBE PANW SNPS VMW FTNT CRWD PLTR SPLK

Traded in Other Exchanges

1F9:Germany 1F9:Germany

Address

3001 Bishop Drive, Suite 350, San Ramon, CA, USA, 94583

Website

https://www.five9.com

Five9 offers cloud-native contact center software enabling digital customer service, sales, and marketing engagement. The company's Virtual Contact Center platform combines core telephony functionality, omnichannel engagement, and various modules into a unified cloud contact-center-as-a-service, or CCaaS, platform. Five9's modules include digital self-service, agent assist technology, workflow automation, as well as workforce optimization solutions that optimize call center efficiency, and manage interaction quality and agent performance.

Executives

Panos Kozanian	officer: EVP, Product Engineering	3001 BISHOP DR., STE. #350, SAN RAMON CA 94583
Leena Mansharamani	officer: SVP, Chief Accounting Officer	3001 BISHOP DR., STE. #350, SAN RAMON CA 94583
Michael Burkland	officer: CEO, President and Chairman	C/O FIVE9, INC., 4000 EXECUTIVE PARKWAY, SUITE 400, SAN RAMON CA 94583
Daniel P. Burkland	officer: EVP, Sales & Business Dev.	C/O FIVE9, INC., 4000 EXECUTIVE PARKWAY, SUITE 400, SAN RAMMON CA 94583
Barry Zwarenstein	officer: Chief Financial Officer	C/O IOMEGA CORP, 4435 EASTGATE MALL 3RD FLOOR, SAN DIEGO CA 92121
Jonathan D Mariner	director	2200 WEST DON TYSON PARKWAY, SPRINGDALE AR 72762
Julie Iskow	director	2900 UNIVERSITY BOULEVARD, AMES X1 50010
Kimberly Alexy	director	500 MCCARTHY BLVD., MILPITAS CA 95035
Jack L Acosta	director	C/O FIVE9, INC., 4000 EXECUTIVE PARKWAY, SUITE 400, SAN RAMON CA 94583
Rowan M Trollope	director, officer: Chief Executive Officer	4000 EXECUTIVE PARKWAY, SUITE #400, SAN RAMON CA 94583
Michael J Burdiek	director	39 PARKER, IRVINE CA 92618
Scott Welch	officer: EVP, Cloud Operations	C/O FIVE9, INC., 4000 EXECUTIVE PARKWAY, SUITE 400, SAN RAMON CA 94583
David G Dewalt	director
Ana G. Pinczuk	director	5725 DELPHI DRIVE, TROY MI 48098
Robert Zollars	director	3061 ZANKER RD, SAN JOSEC CA 95134