CECO Environmental (CECO Environmental) Predictability Rank

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What is CECO Environmental 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.

CECO Environmental 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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CECO Environmental (CECO Environmental) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Industrials » Industrial Products » CECO Environmental Corp (NAS:CECO) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

WCE:Germany

Address

14651 North Dallas Parkway, Suite 500, Dallas, TX, USA, 75254

Website

https://www.cecoenviro.com

CECO Environmental Corp serves the energy, industrial, and other niche markets. The company operates through the Engineered Systems segment that serves the power generation, refinery, water/wastewater, and midstream oil and gas markets, and Industrial Process Solutions segment, which serves the broad industrial air pollution control, beverage can, fluid handling, electric vehicle production, food and beverage, semi-conductor, process filtration, pharmaceutical, petrochemical, wastewater treatment, wood manufacturing, desalination, and aquaculture markets. The majority of revenue is earned from the Engineered Systems Segment.

Executives

Todd R Gleason	director, officer: Chief Executive Officer	5500 WAYZATA BLVD., SUITE 800, GOLDEN VALLEY MN 55416
Richard F Wallman	director	HONEYWELL, 101 COLUMBIA ROAD, MORRISTOWN NJ 07962
Laurie Siegel	director	C/O VOLT INFORMATION SCIENCES, INC., 1133 AVENUE OF THE AMERICAS, 15TH FLOOR, NEW YORK NY 10036
Kiril Kovachev	officer: Chief Accounting Officer	14651 NORTH DALLAS PARKWAY, SUITE 500, DALLAS TX 75254
Paul M Gohr	officer: Chief Accounting Officer	4625 RED BANK ROAD, SUITE 200, CINCINNATI OH 45227
David B Liner	director	6901 PROFESSIONAL PARKWAY E, STE 200, SARASOTA FL 34240
Ramesh Nuggihalli	officer: Chief Operating Officer	14651 NORTH DALLAS PARKWAY, SUITE 500, DALLAS TX 75254
Peter K. Johansson	officer: See Remarks	14651 DALLAS PARKWAY, SUITE 500, DALLAS TX 75254
Knowling Robert E Jr	director	C/O HEWLETT-PACKARD CO, 3000 HANOVER STREET, PALO ALTO CA 94304
Joycelynn Watkins-asiyanbi	officer: General Counsel and Secretary	14651 DALLAS PARKWAY, SUITE 500, DALLAS TX 75254
Chasity Henry	officer: See Remarks	14651 NORTH DALLAS PARKWAY, SUITE 500, DALLAS TX 75254
Jonathan Pollack	director	2300 YONGE STREET, SUITE 1710, TORONTO A6 M4P 1E4
Matthew Eckl	officer: Chief Financial Officer	4625 RED BANK ROAD, SUITE 299, CINCINNATI OH 45227
Jason Dezwirek	director, 10 percent owner	2300 YONGE STREET, SUITE 1710, TORONTO A6 M4P 1E4
Dennis Sadlowski	director	4625 RED BANK ROAD, SUITE 200, CINCINNATI OH 45227