SNBR (Sleep Number) Predictability Rank

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What is Sleep Number 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.

Sleep Number 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

Sleep Number Predictability Rank Related Terms

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Sleep Number Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Consumer Cyclical » Furnishings, Fixtures & Appliances » Sleep Number Corp (NAS:SNBR) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

SL2:Germany

Address

1001 Third Avenue South, Minneapolis, MN, USA, 55404

Website

https://www.sleepnumber.com

Sleep Number Corp. is a wellness technology company engaged in the design, manufacturing, marketing and distribution of sleep solutions. The Company generates revenue by marketing and selling its smart beds directly to new and existing customers through its vertically integrated, exclusive, direct-to-consumer retail touch points including Stores, Online, Phone, and Chat (Total Retail). The products offered by the company are Mattresses, Bedding, Pillows and Furniture.

Executives

Phillip Eyler	director	C/O HARMAN INTERNATIONAL INDUSTRIES, INC, 400 ATLANTIC STREET, STAMFORD CT 06901
Francis K Lee	officer: EVP & CFO	1001 THIRD AVENUE SOUTH, MINNEAPOLIS MN 55404
Samuel R Hellfeld	officer: SVP Chief Legal & Risk Officer	1001 THIRD AVENUE SOUTH, MINNEAPOLIS MN 55404
Brenda J Lauderback	director	IRWIN FINANCIAL CORPORATION, 500 WASHINGTON STREET, COLUMBUS IN 47201
Julie Howard	director	MANPOWERGROUP INC., 100 MANPOWER PLACE, MILWAUKEE WI 53212
Michael J Harrison	director	200 DOMAIN DRIVE, STRATHAM NH 03885
Joel Joseph Laing	officer: Treasurer & CAO	1001 THIRD AVENUE SOUTH, MINNEAPOLIS MN 55404
Angel L Mendez	director	C/O SLEEP NUMBER CORPORATION, 1001 THIRD AVENUE SOUTH, MINNEAPOLIS MN 55404
Kevin Kennedy Brown	officer: SVP and CMO	9800 59TH AVENUE NORTH, MINNEAPOLIS MN 55442
Christopher D Krusmark	officer: SVP & Chief H.R. Officer	1001 THIRD AVENUE SOUTH, MINNEAPOLIS MN 55404
Daniel Alegre	director	9800 59TH AVENUE NORTH, MINNEAPOLIS MN 55317
Jean Michel Valette	director	28 MAPLE AVE, KENTFIELD CT 06897
Melissa Barra	officer: SVP, Chief Strategy & CRO	9800 59TH AVENUE NORTH, MINNEAPOLIS MN 55442
Shelly Radue Ibach	officer: Senior VP - U.S. Retail Sales	6105 TRENTON LANE NORTH, MINNEAPOLIS MN 55442
Robert Joseph Poirier	officer: VP, CAO	1001 THIRD AVENUE SOUTH, MINNEAPOLIS MN 55442