Cass Information Systems (Cass Information Systems) Predictability Rank

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What is Cass Information Systems 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.

Cass Information Systems 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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Cass Information Systems (Cass Information Systems) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Industrials » Business Services » Cass Information Systems Inc (NAS:CASS) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

CC3:Germany

Address

12444 Powerscourt Drive, Suite 550, St. Louis, MO, USA, 63131

Website

https://www.cassinfo.com

Cass Information Systems Inc is a provider of payment and information processing services to large manufacturing, distribution and retail enterprises across the United States. The company provides transportation invoice rating, payment processing, auditing, accounting, and transportation information. It is also a processor and payer of energy invoices, including electricity, gas, waste, and other facility-related expenses. It operates in two segments: Information Services and Banking Services. The firm generates maximum revenue from the Information Services segment.

Executives

Martin H. Resch	officer: President & CEO	12444 POWERSCOURT DRIVE, SUITE 550, ST. LOUIS MO 63131
Frank Wicks	director	3050 SPRUCE STREET, ST LOUIS MO 63103
James J Lindemann	director	13001 HOLLENBERG DRIVE, BRIDGETON MO 63044
Randall L Schilling	director	13001 HOLLENBERG DRIVE, BRIDGETON MO 63044
Ralph W Clermont	director	5570 DTC PARKWAY, GREENWOOD VILLAGE CO 80111
Joseph D Rupp	director	QUANEX BUILDING PRODUCTS CORPORATION, 1800 W LOOP SOUTH, SUITE 1500, HOUSTON TX 77027
Michael James Normile	officer: CFO	12444 POWERSCOURT DRIVE, SUITE 550, ST. LOUIS MO 63131
Ann Walter Marr	director	12444 POWERSCOURT DRIVE, SUITE 550, ST. LOUIS MO 63131
Wendy J. Henry	director	12444 POWERSCOURT DRIVE, SUITE 550, ST. LOUIS MO 63131
Gary B Langfitt	officer: COO-Utility Info Services	13001 HOLLENBERG DR, BRIDGETON MO 63044
Matthew Steven Schuckman	officer: Executive Vice President	12444 POWERSCOURT DRIVE, SUITE 550, ST. LOUIS MO 63131
Sally H Roth	director	12444 POWERSCOURT DRIVE, SUITE 550, ST. LOUIS MO 63131
Dwight D Erdbruegger	officer: President	12444 POWERSCOURT DRIVE, SUITE 550, ST. LOUIS MO 63131
Robert J Mathias	officer: President, Cass Bank	ACKRUTI, MIDC CROSS ROAD NO. 21, ANDHERI(E) MUMBAI K7 400093
Cavellier James M Jr	officer: CIO	12444 POWERSCOURT DRIVE, SUITE 550, ST. LOUIS MO 63131