Teradata (Teradata) Predictability Rank

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What is Teradata 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.

Teradata 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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Teradata (Teradata) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Technology » Software » Teradata Corp (NYSE:TDC) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

3T4:Germany

Address

17095 Via Del Campo, San Diego, CA, USA, 92127

Website

https://www.teradata.com

Teradata Corp provides analytic data products and related services. The Company operates in data and analytics, which captures, integrates, stores, manages, and analyzes data of all types to answer business questions and deliver insight; and marketing applications, which offer marketing management products to help businesses win customer loyalty. Its solutions include components such as data warehousing, Asset optimization, Fraud prevention, Product innovation, and risk mitigation. A majority of the firm's revenue is generated in the United States.

Executives

Todd Cione	officer: Chief Revenue Officer	17095 VIA DEL CAMPO, SAN DIEGO CA 92127
Margaret A Treese	officer: Chief Legal Officer	17095 VIA DEL CAMPO, SAN DIEGO CA 92127
Stephen Mcmillan	director, officer: President and CEO	C/O F5 NETWORKS, INC., 401 ELLIOTT AVE. WEST, SEATTLE WA 98119
Claire Bramley	officer: Chief Financial Officer	HP, 1501 PAGE MILL ROAD, PALO ALTO CA 94304
Hillary Ashton	officer: Chief Product Officer	17095 VIA DEL CAMPO, SAN DIEGO CA 92127
Kathleen R Cullen-cote	officer: Chief Human Resources Officer	17095 VIA DEL CAMPO, SAN DIEGO CA 92127
Michael P Gianoni	director	2000 DANIEL ISLAND DRIVE, CHARLESTON SC 29492
Michael D Hutchinson	officer: Chief Customer Officer	17095 VIA DEL CAMPO, SAN DIEGO CA 92127
Todd Mcelhatton	director	101 REDWOOD SHORES PARKWAY, REDWOOD CITY CA 94065
Chou Timothy C K	director
Jacqueline D. Woods	officer: Chief Marketing Officer	PO BOX 152, FOREST CITY IA 50436
Martyn Etherington	officer: Chief Marketing Officer	17095 VIA DEL CAMPO, SAN DIEGO CA 92127
Daniel L Harrington	officer: EVP, Technology & Support Svcs	17095 VIA DEL CAMPO, SAN DIEGO CA 92127
Mark Culhane	officer: EVP & Chief Financial Officer	6200 STONERIDGE MALL ROAD, SUITE 500, PLEASANTON CA 94588
David E Kepler	director	17095 VIA DEL CAMPO, SAN DIEGO CA 92127