Children's Place (Children's Place) Predictability Rank

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What is Children's Place 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.

Children's Place 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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Children's Place (Children's Place) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Consumer Cyclical » Retail - Cyclical » Children's Place Inc (NAS:PLCE) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

CP5:Germany CP5:Germany

Address

500 Plaza Drive, Secaucus, NJ, USA, 07094

Website

https://www.childrensplace.com

Children's Place Inc is pure-play children's specialty apparel retailer in North America. It design, contract to manufacture, sell at retail and wholesale, and license to sell, trend right, high quality merchandise predominantly at value prices, under proprietary The Children's Place, Place, Baby Place, Gymboree, Sugar & Jade, and PJ Place brand names.

Executives

Maegan Markee	officer: BRAND PRESIDENT	500 PLAZA DRIVE, SECAUCUS NJ 07094
Alicia Enciso	director	1721 VALLEY AVENUE, MCLEAN VA 22101
Jane T Elfers	officer: President and CEO	C/O THE CHILDRENS PLACE RETAIL STORES, 915 SECAUCUS ROAD, SECAUCUS NJ 07094
Wesley S Mcdonald	director
Michael A Shaffer	director	C/O PHILLIPS-VAN HEUSEN CORPORATION, 200 MADISON AVENUE, NEW YORK NY 10016
Sheamus Toal	officer: SVP, CHIEF FINANCIAL OFFICER	450 W. 33RD STREET, 5TH FLOOR, NEW YORK NY 10001
John E. Bachman	director	77 EXETER STREET, 1809, BOSTON MA 02116
Joseph A Alutto	director	810 CURLEYS COURT, COLUMBUS OH 43235
Jared Shure	officer: SVP, GEN COUNSEL & SECRETARY	500 PLAZA DRIVE, THE CHILDREN'S PLACE, SECAUCUS NJ 07094
Elizabeth J Boland	director	C/O BRIGHT HORIZONS FAMILY SOLUTIONS, 2 WELLS AVENUE, NEWTON MA 02459
Deborah Derby	officer: CHIEF ADMINISTRATIVE OFFICER	TOYS R US INC, 225 SUMMIT AVE, MONTVALE NJ 07645
Katherine Kountze	director	500 PLAZA DRIVE, C/O THE CHILDREN'S PLACE, SECAUCUS NJ 07094
Michael D Rinaldo	officer: CHIEF ACCOUNTING OFFICER	C/O TIFFANY & CO., 727 FIFTH AVENUE, NEW YORK NY 10022
Leah Swan	officer: CHIEF ADMINISTRATIVE OFFICER	500 PLAZA DRIVE, C/O THE CHILDREN'S PLACE, INC., SECAUCUS NJ 07094
Robert F Helm	officer: SVP, FINANCE & INV MGMT (CAO)	500 PLAZA DRIVE, THE CHILDREN'S PLACE, SECAUCUS NJ 07094