Pro-Dex (Pro-Dex) Predictability Rank

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What is Pro-Dex 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.

Pro-Dex 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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Pro-Dex (Pro-Dex) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Healthcare » Medical Devices & Instruments » Pro-Dex Inc (NAS:PDEX) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

PDXN:Germany

Address

2361 McGaw Avenue, Irvine, CA, USA, 92614

Website

https://www.pro-dex.com

Pro-Dex Inc is engaged in designing, developing, and manufacturing powered rotary drive surgical and dental instruments used primarily in the orthopedic, spine, maxocranial facial and dental markets. The company also designs and manufactures multi-axis motion control systems used in factory automation and scientific research markets. In addition, the company provides engineering consulting and placement services, as well as quality and regulatory consulting services. Most of the company's revenue is derived from designing, developing, and manufacturing surgical devices for the medical device and dental industries.

Executives

Angelita Rebamontan Domingo	director	1431 MADISON ST., TUSTIN CA 92782
Van Kirk Richard Lee Jr	director, officer: Chief Executive Officer	34 DEER CREEK, IRVINE CA 92604
Philp Katrina Marie Kramer	director	5501 NANTUCKET PL, MINNETONKA MN 55345
Farrell William James Iii	director	20200 COTTAGEWOOD RD, DEEPHAVEN MN 55331
Peter O. Haeg	10 percent owner	12701 WHITEWATER DR, SUITE 190, MINNETONKA MN 55343
Alisha Charlton	officer: Chief Financial Officer	25541 COMMERCENTRE DRIVE, LAKE FOREST CA 92630
Nicholas John Swenson	10 percent owner	5000 WEST 36TH STREET, SUITE 130, MINNEAPOLIS MN 55416
Raymond E Cabillot	director	3033 EXCELSIOR BLVD., STE 560, MINNEAPOLIS MN 55416
David Hovda	director
Farnam Street Partners Lp /mn	10 percent owner	3033 EXCELSIOR BOULEVARD, MINNEAPOLIS, MINNEAPOLIS MN 55416
Ao Partners I, Lp	10 percent owner	5000 WEST 36TH STREET, SUITE 130, MINNEAPOLIS MN 55416
David Holder	director	1052 CHARWOOD LANE, SANTA ANA CA 92705
William L Healey	director	101 BULLITT LANE, STE 450, LOUISVILLE KY 40222
Michael J Berthelot	director	P O BOX 7277, RANCHO SANTA FE CA 92067
George J Isaac	director	36 WHISPER DRIVE, WORCESTER MA 01609