What is R1 RCM Predictability Rank?
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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.
R1 RCM 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
Also read:
Part II: What worked in the market from 1998-2008? Part II: Role of Valuations
Part III: Intrinsic Value, Discounted Cash Flow and Margin of Safety
R1 RCM (R1 RCM) Business Description
Traded in Other Exchanges
Address
434 West Ascension Way, 6th Floor, Murray, UT, USA, 84123
R1 RCM Inc is a provider of technology-driven solutions that transform the patient experience and financial performance of healthcare providers. Its services help healthcare providers generate sustainable improvements in their operating margins and cash flows while also enhancing patient, physician, and staff satisfaction for the customers, Its service offering consists of end-to-end RCM services for health systems, hospitals, and physician groups that provide comprehensive revenue cycle infrastructure to providers, including all revenue cycle personnel, technology solutions, and process workflow. The majority of the revenue comes from the operating fees received.
Executives
| Dominic Nakis |
director |
433 W ASCENSION WAY, SUITE 200, MURRAY UT 84123 |
| Henneman John B Iii |
director |
311 C ENTERPRISE DRIVE, PLAINSBORO NJ 08536 |
| Evans Richard B. Jr. |
officer: Principal Accounting Officer |
C/O ACCRETIVE HEALTH, INC., 401 N. MICHIGAN AVENUE, SUITE 2700, CHICAGO IL 60611 |
| John M. Sparby |
officer: See Remarks |
C/O R1 RCM INC., 401 N. MICHIGAN AVENUE, SUITE 2700, CHICAGO IL 60611 |
| Lee Rivas |
officer: President |
C/O R1 RCM INC., 434 W. ASCENSION WAY, 6TH FLOOR, MURRAY UT 84123 |
| Kyle Hicok |
officer: Chief Commercial Officer |
434 W. ASCENSION WAY, 6TH FLOOR, MURRAY UT 84123 |
| Jennifer D. Williams |
officer: Chief Financial Officer |
434 W. ASCENSION WAY, 6TH FLOOR, MURRAY UT 84123 |
| Janie Wade |
director |
C/O R1 RCM INC., 434 W. ASCENSION WAY, 6TH FLOOR, MURRAY UT 84123 |
| Tcp-asc Achi Series Lllp |
director, 10 percent owner |
65 E 55TH ST 27TH FLOOR, TOWERBROOK CAPITAL PARTNERS L.P., NEW YORK NY 10022 |
| Joseph Gerard Flanagan |
director, officer: Chief Executive Officer |
C/O NORTEL NETWORKS CORPORATION, 195 THE WEST MALL, TORONTO A6 M9C 5K1 |
| Brian K. Dean |
director |
R1 RCM INC., 434 W. ASCENSION WAY, 6TH FLOOR, MURRAY UT 84123 |
| Gary Steven Long |
officer: See Remarks |
7050 BRIXTON PLACE, SUWANEE GA 30024 |
| Michael C. Feiner |
director |
1166 AVENUE OF THE AMERICAS, 3RD FLOOR, NEW YORK NY 10036 |
| Matthew S. Holt |
director |
C/O NEW MOUNTAIN CAPITAL, LLC, 787 SEVENTH AVENUE, 49TH FLOOR, NEW YORK NY 10019 |
| Bradford Kyle Armbrester |
director |
311 ARSENAL STREET, WATERTOWN MA 02472 |
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