Natera (Natera) Predictability Rank

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What is Natera 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.

Natera 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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Natera (Natera) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Healthcare » Medical Diagnostics & Research » Natera Inc (NAS:NTRA) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

N/A

Address

13011 McCallen Pass, Building A Suite 100, Austin, TX, USA, 78753

Website

https://www.natera.com

Natera Inc is a diagnostic and research company with proprietary molecular and bioinformatics technology. The company's key product offerings include its Panorama Non-Invasive Prenatal Test (NIPT) which screens for chromosomal abnormalities of a fetus as well as in twin pregnancies, typically with a blood draw from the mother, Horizon Carrier Screening (HCS) to determine carrier status for a large number of severe genetic diseases that could be passed on to the carrier's children, Signatera molecular residual disease (MRD) test, which detects circulating tumor DNA in patients previously diagnosed with cancer to assess molecular residual disease and monitor for recurrence; and Prospera, to assess organ transplant rejection.

Executives

Michael Burkes Brophy	officer: Chief Financial Officer	201 INDUSTRIAL ROAD, SUITE 410, SAN CARLOS CA 94070
Steven Leonard Chapman	officer: Chief Operating Officer	201 INDUSTRIAL ROAD, SUITE 410, SAN CARLOS CA 94070
Daniel Rabinowitz	officer: CHIEF LEGAL OFFICER	C/O NATERA, INC., 13011 MCCALLEN PASS BUILDING A SUITE 100, AUSTIN TX 78753
Jonathan Sheena	director, officer: Chief Technology Officer	C/O NATERA, INC., 201 INDUSTRIAL ROAD, SUITE 410, SAN CARLOS CA 94070
James Healy	director	3000 SAND HILL ROAD, 4-250, MENLO PARK CA 94025
Gail Boxer Marcus	director	201 INDUSTRIAL ROAD, SUITE 410, SAN CARLOS CA 94070
Rowan E Chapman	director	201 INDUSTRIAL ROAD, SUITE 410, SAN CARLOS CA 94070
Matthew Rabinowitz	director, officer: Chief Executive Officer	C/O NATERA, INC., 201 INDUSTRIAL ROAD, SUITE 410, SAN CARLOS CA 94070
Brinkley Ruth Williams	director	C/O TRAVERE THERAPEUTICS, INC., 3611 VALLEY CENTRE DRIVE, SUITE 300, SAN DIEGO CA 92130
Robert Alan Schueren	officer: Chief Operating Officer	7400 PASEO PADRE PARKWAY, FREMONT CA 94555
Roelof Botha	director	C/O SEQUOIA CAPITAL, 2800 SAND HILL RD, SUITE 101, MENLO PARK CA 94025
Herm Rosenman	officer: Chief Financial Officer	OXFORD IMMUNOTEC GLOBAL PLC, 94C INNOVATION DRIVE, HILTON PARK, SAN DIEGO X0 OX14 4RZ
Todd C Cozzens	director	ONE FEDERAL STREET, 25TH FLOOR, BOSTON MA 02110
Monica Bertagnolli	director	C/O LEAP THERAPEUTICS, INC., 47 THORNDIKE STREET, SUITE B1-1, CAMBRIDGE MA 02141
Roy D. Baynes	director	C/O RETROPHIN, INC., 12255 EL CAMINO REAL, SUITE 250, SAN DIEGO CA 92130