What is Spirit Airlines Predictability Rank?
1 (5)
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.
Spirit Airlines 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
Spirit Airlines (Spirit Airlines) Business Description
Traded in Other Exchanges
Address
2800 Executive Way, Miramar, FL, USA, 33025
Spirit Airlines Inc serves the United States, Latin America, and Caribbean as an airline operator. It primarily offers customers unbundled base fares to strip out any unneeded travel amenities. If needed, a customer can elect for additional options at an extra charge. Flight crews are entirely interchangeable across all aircraft, and maintenance and other support services are simplified due to not having an overly complex fleet. The company has one operating segment, air transportation, owing to its system wide route structure. It may decide to expand its network if a market is underserved or overpriced. The majority of revenue is derived from the United States.
Executives
| Rocky Wiggins |
officer: SVP and CIO |
C/O SPIRIT AIRLINES, INC., 2800 EXECUTIVE WAY, MIRAMAR FL 33025 |
| Melinda C Grindle |
officer: SVP & CHRO |
C/O SPIRIT AIRLINES, INC., 2800 EXECUTIVE WAY, MIRAMAR FL 33025 |
| Robert D Johnson |
director |
HONEYWELL, 1944 E SKY HARBOR CIRCLE, PHOENIX AZ 85034 |
| Brian J. Mcmenamy |
officer: VP & Controller |
C/O SPIRIT AIRLINES, INC., 2800 EXECUTIVE WAY, MIRAMAR FL 33025 |
| Laurie Villa |
officer: SVP and CHRO |
C/O SPIRIT AIRLINES, INC., 2800 EXECUTIVE WAY, MIRAMAR FL 33025 |
| John A. Bendoraitis |
officer: EVP and COO |
C/O SPIRIT AIRLINES, INC., 2800 EXECUTIVE WAY, MIRAMAR FL 33025 |
| Thomas C Canfield |
officer: SVP, GC & Secretary |
C/O SPIRIT AIRLINES, INC., 2800 EXECUTIVE WAY, MIRAMAR FL 33025 |
| Kevin Blake Vanier |
officer: VP of FP & A |
C/O SPIRIT AIRLINES, INC., 2800 EXECUTIVE WAY, MIRAMAR FL 33025 |
| Christine P Richards |
director |
942 SOUTH SHADY GROVE ROAD, MEMPHIS TN 38120 |
| Mark B Dunkerley |
director |
|
| H. Mcintyre Gardner |
director |
C/O SPIRIT AIRLINES, 2800 EXECUTIVE WAY, MIRAMAR FL 33025 |
| Christie Edward M Iii |
officer: Chief Financial Officer |
S/O SPIRIT AIRLINES, INC., 2800 EXECUTIVE WAY, MIRAMAR FL 33025 |
| Robert L Fornaro |
director |
C/O SPIRIT AIRLINES, INC., 2800 EXECUTIVE WAY, MIRAMAR FL 33025 |
| Matthew H Klein |
officer: SVP and CCO |
C/O SPIRIT AIRLINES, INC., 2800 EXECUTIVE WAY, MIRAMAR FL 33025 |
| Dawn M. Zier |
director |
600 OFFICE CENTER DRIVE, FORT WASHINGTON PA 19034 |
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