What is Barnes & Noble Education 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.
Barnes & Noble Education 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
Barnes & Noble Education (Barnes & Noble Education) Business Description
Traded in Other Exchanges
Address
120 Mountain View Boulevard, Basking Ridge, NJ, USA, 07920
Barnes & Noble Education Inc is an operator of bookstores in college and university campuses across the United States. The company is also engaged in providing digital education services. It operates in three reportable segments: Retail, wholesale, and Corporate Services.
Executives
| Kevin Watson |
officer: EVP, CFO |
1111 STEWART AVENUE, BETHPAGE NY 11714 |
| Raphael Wallander |
director |
3601 SOUTH CONGRESS AVENUE, BUILDING E, AUSTIN TX 78704 |
| Steven G Panagos |
director |
C/O SPIRIT MTA REIT, 2727 NORTH HARWOOD STREET, SUITE 300, DALLAS TX 75201 |
| Michael Huseby |
director |
12405 POWERSCOURT DR, C/O CHARTER COMMUNICATIONS, ST LOUIS MO 63131 |
| Denise Warren |
director |
209 REDWOOD SHORES PKWY, REDWOOD CITY CA 94065 |
| Mario R. Dell'aera |
director |
C/O BARNES & NOBLE EDUCATION, INC., 120 MOUNTAINVIEW BLVD., BASKING RIDGE NJ 07920 |
| Kathryn Eberle Walker |
director |
1621 NORTH KENT STREET, SUITE 1200, ARLINGTON VA 22209 |
| Zachary Levenick |
other: See Explanation of Responses |
840 SOUTH GRAND AVENUE, PASADENA CA 91105 |
| David G Golden |
director |
C/O BLACKBAUD, INC., 2000 DANIEL ISLAND DRIVE, CHARLESTON SC 29492 |
| Miller Michael Connolly |
officer: CLO & VP Corp Affairs |
C/O BARNES & NOBLE EDUCATION, INC, 120 MOUNTAIN VIEW BLVD, BASKING RIDGE NJ 07920 |
| Nenke David W. B. |
officer: Pres, DSS |
C/O BARNES & NOBLE EDUCATION, INC., 120 MOUNTAIN VIEW BLVD., BASKING RIDGE NJ 07920 |
| David A Wilson |
director |
|
| David Gordon Henderson |
officer: Pres, MBS; EVP, Strat Services |
C/O BARNES & NOBLE EDUCATION, INC., 120 MOUNTAIN VIEW BLVD., BASKING RIDGE NJ 07920 |
| Seema Paul |
officer: Chief Accounting Officer |
C/O BARNES & NOBLE EDUCATION, INC., 120 MOUNTAIN VIEW BLVD, BASKING RIDGE NJ 07920 |
| Jonathan Shar |
officer: EVP, Retail & Client Solutions |
C/O BARNES & NOBLE EDUCATION, INC., 120 MOUNTAIN VIEW BLVD., BASKING RIDGE NJ 07920 |
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