WEX (WEX) Predictability Rank

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What is WEX 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.

WEX 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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WEX (WEX) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Technology » Software » WEX Inc (NYSE:WEX) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

WL9:Germany

Address

1 Hancock Street, Portland, ME, USA, 04101

Website

https://www.wexinc.com

WEX Inc is a provider of corporate payment solutions. The company operates three business segments: Fleet solutions, Travel & Corporate Solutions, and Health & Employee Benefit Solutions. Fleet Solutions, the largest segment by revenue, provides fleet vehicle payment-processing services for commercial and government fleets. Travel and corporate solutions offer business-to-business payment processing and transaction monitoring services. Health and employee benefit solutions generate revenue from healthcare payment products and its consumer-directed software platform. Wex's largest end market is the United States of America.

Executives

Jack Vanwoerkom	director
Jennifer Kimball	officer: Interim CFO	C/O WEX INC., 97 DARLING AVENUE, SOUTH PORTLAND ME 04106
Stephen Montgomery Smith	director	C/O WEX INC., 97 DARLING AVENUE, SOUTH PORTLAND ME 04106
Robert Joseph Deshaies	officer: President, WEX Health	C/O WEX INC., 97 DARLING AVENUE, SOUTH PORTLAND ME 04106
Melanie J Tinto	officer: Chief Human Resources Officer	C/O WEX INC., 97 DARLING AVENUE, SOUTH PORTLAND ME 04106
James R Groch	director	50 SOUTH 16TH STREET, SUITE 3000, PHILADELPHIA PA 19102
Carlos Carriedo	officer: COO, International	C/0 WEX INC., 97 DARLING AVENUE, SOUTH PORTLAND ME 04106
Melissa D Goodwin	officer: SVP, Finance and CFO	C/O WRIGHT EXPRESS CORPORATION, 97 DARLING AVENUE, SOUTH PORTLAND ME 04106
Regina O Sommer	director	201 JONES RD, WALTHAM MA 02451
David G Cooper	officer: Chief Technology Officer	C/O WEX INC., 9, SOUTH PORTLAND ME 04106
Hilary A Rapkin	officer: SVP, Gen. Counsel & Corp. Sec.	C/O WRIGHT EXPRESS CORPORATION, 97 DARLING AVENUE, SOUTH PORTLAND ME 04106
Derrick A. Roman	director	C/O COMMSCOPE HOLDING COMPANY, INC., 1100 COMMSCOPE PLACE, SE, HICKORY NC 28602
Jagtar Narula	officer: Chief Financial Officer	333 THREE D SYSTEMS CIRCLE, ROCK HILL SC 29730
Karen B. Stroup	officer: Chief Digital Officer	440 S. CHURCH STREET, SUITE 700, CHARLOTTE NC 28202
Bhavana Bartholf	director	C/O WEX INC., 97 DARLING AVENUE, SOUTH PORTLAND ME 04106