Papa Murphy′s Holdings (Papa Murphy′s Holdings) Predictability Rank

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What is Papa Murphy′s Holdings 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.

Papa Murphy′s Holdings 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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Papa Murphy′s Holdings (Papa Murphy′s Holdings) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Consumer Cyclical » Restaurants » Papa Murphy′s Holdings Inc (NAS:FRSH) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

N/A

Address

8000 North East Parkway Drive, Suite 350, Vancouver, WA, USA, 98662

Website

http://www.papamurphys.com

Papa Murphy's Holdings Inc is a quick-service pizza restaurant. It primarily franchises its stores, but company-owned stores still generate more than half of the company's total revenue. Papa Murphy's has a Take 'N' Bake model, where customers create and pick up raw pizzas in the restaurants and then bake them at home. The Take 'N' Bake model requires less capital investment and lower operating costs, since stores do not require ovens, dining areas, or serving staff. Nearly all locations are in the United States, but the company has international exposure in Canada and the Middle East.

Executives

L David Mounts	director	3910 WHITE HAWK LN, WINSTON-SALEM NC 27106
Jean Birch	director	3050 SOFT HORIZON WAY, LAS VEGAS NV 89135
Alexander C Matina	director	C/O MFP INVESTORS, LLC, 667 MADISON AVE, 25TH FL, NEW YORK NY 10065
Michael F Price	10 percent owner	C/O MFP INVESTORS LLC, 909 THIRD AVE, 33RD FLOOR, NEW YORK NY 10022
Mfp Partners Lp	10 percent owner	909 THIRD AVENUE, 33RD FLOOR, New York NY 10022
Mfp Investors Llc	10 percent owner	909 THIRD AVE, 33RD FLOOR, NEW YORK NY 10022
Noah A. Elbogen	director	7755 CENTER AVENUE, SUITE 300, HUNTINGTON BEACH CA 92647
Katherine Lee Scherping	director	6312 SOUTH FIDDLERS GREEN CIRCLE, SUITE 200 NORTH, GREENWOOD VILLAGE CO 80111
Jeffrey B Welch	director	111 N. CANAL, SUITE 850, CHICAGO IL 60606
Brandon Solano	officer: Chief Marketing Officer	3551 PLANO PARKWAY, THE COLONY TX 75056
Thomas H Lee	director, 10 percent owner	C/O THOMAS H. LEE CAPITAL LLC, 767 FIFTH AVENUE, 6TH FLOOR, NEW YORK NY 10153
John Barr	director, officer: Chairman	2555 TELEGRAPH ROAD, BLOOMFIELD HILLS MI 48302-0954