Granite Construction (Granite Construction) Predictability Rank

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What is Granite Construction 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.

Granite Construction 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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Granite Construction (Granite Construction) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Industrials » Construction » Granite Construction Inc (NYSE:GVA) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

GRG:Germany

Address

585 West Beach Street, Watsonville, CA, USA, 95076

Website

https://www.graniteconstruction.com

Granite Construction Inc engages in the construction and development of various infrastructure projects on behalf of public and private clients in the United States. It focuses on heavy civil infrastructure projects, including roads, highways, transit facilities, airports, and bridges. In addition, the company performs site preparation and infrastructure services for residential development, energy development, and other facilities. The majority of revenue is derived from the company's construction operating segment, with the remainder derived from its materials segment.

Executives

Bradley Jay Williams	officer: Senior Vice President	C/O 585 WEST BEACH STREET, WATSONVILLE CA 95076
Kyle T Larkin	officer: Senior Vice President	C/O 585 WEST BEACH STREET, WATSONVILLE CA 95076
Staci M Woolsey	officer: Chief Accounting Officer	4875 S FRANKLIN ST, CHERRY HILLS VILLAGE CO 80113
Louis E Caldera	director	C/O BELO CORP, PO BOX 655237, DALLAS TX 75265-5237
Laura M Mullen	director	C/O 585 WEST BEACH STREET, WATSONVILLE CA 95076
Brian R Dowd	officer: Senior Vice President	C/O 585 WEST BEACH STREET, WATSONVILLE CA 95076
Lisa Curtis	officer: CAO & VP, Investor Relations	3200 SOUTHWEST FREEWAY, SUITE 2950, HOUSTON TX 77027
James A Radich	officer: Senior Vice President	C/O 585 WEST BEACH STREET, WATSONVILLE CA 95076
Michael G Tatusko	officer: Senior Vice President	C/O 585 WEST BEACH STREET, WATSONVILLE CA 95076
Desai Jigisha	officer: Senior Vice President & CFO	C/O 585 WEST BEACH STREET, WATSONVILLE CA 95076
Claes Bjork	director	GRANITE CONSTRUCTION INCORPORATED, PO BOX 50085, WATSONVILLE CA 95077-5085
Patricia D Galloway	director	C/O 585 WEST BEACH STREET, WATSONVILLE CA 95076
James Hildebrand Roberts	director, officer: Director, President & CEO	PO BOX 50085, WATSONVILLE CA 95077-5085
David H Kelsey	director	C/O OGLEBAY NORTON CO, 1100 SUPERIOR AVENUE, CLEVELAND OH 44114-2598
Molly Campbell	director	135 N. LOS ROBLES AVE 7TH FLR, PASADENA CA 91101