Penumbra (Penumbra) Predictability Rank

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What is Penumbra 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.

Penumbra 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

Penumbra Predictability Rank Related Terms

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Penumbra (Penumbra) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Healthcare » Medical Devices & Instruments » Penumbra Inc (NYSE:PEN) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

PEN:Mexico 0P8:Germany

Address

One Penumbra Place, Alameda, CA, USA, 94502

Website

https://www.penumbrainc.com

Penumbra Inc develops and manufactures medical devices for the neurovascular and peripheral vascular markets. Its products are primarily sold to hospitals and are developed for use by specialist physicians. The neurovascular product category contributes to the majority of revenue. Within the neurovascular business, the firm offers products for neurovascular access, ischemic stroke, neurovascular embolization, and neurosurgical tool markets. In the peripheral vascular business, the firm sells devices related to peripheral embolization and peripheral thrombectomy. Penumbra generates the majority of its revenue in the United States.

Executives

Harpreet Grewal	director	C/O VISTAPRINT USA, INCORPORATED, 100 HAYDEN AVE., LEXINGTON MA 02050
Surbhi Sarna	director	ONE PENUMBRA PLACE, ALAMEDA CA 94502
Johanna Roberts	officer: EVP, Gen. Counsel & Secretary	PENUMBRA, INC., ONE PENUMBRA PLACE, ALAMEDA CA 94502
Bridget O'rourke	director	ONE PENUMBRA PLACE, ALAMEDA CA 94502
Adam Elsesser	director, officer: Chairman, CEO and President	1351 HARBOR BAY PARKWAY, ALAMEDA CA 94502
Don W. Kassing	director	1351 HARBOR BAY PARKWAY, ALAMEDA CA 94502
Thomas Wilder	director	2 MUSICK, IRVINE CA 92618
Arani Bose	director, officer: Chief Innovator	1351 HARBOR BAY PARKWAY, ALAMEDA CA 94502
Lynn Rothman	officer: EVP and Chief Business Officer	1351 HARBOR BAY PARKWAY, ALAMEDA CA 94502
James Robert Pray	officer: President, International	1351 HARBOR BAY PARKWAY, ALAMEDA CA 94502
Sridhar Kosaraju	officer: CFO and Head of Strategy	1351 HARBOR BAY PARKWAY, ALAMEDA CA 94502
Maggie Yuen	officer: Chief Financial Officer	ONE PENUMBRA PLACE, ALAMEDA CA 94502
Lambert Shiu	officer: Chief Accounting Officer	ONE PENUMBRA PLACE, ALAMEDA CA 94502
Janet Leeds	director	ONE PENUMBRA PLACE, ALAMEDA CA 94502
Robert D. Evans	officer: EVP, Gen. Counsel & Secretary	ONE PENUMBRA PLACE, 1351 HARBOR BAY PARKWAY, ALAMEDA CA 94502