Madrigal Pharmaceuticals (Madrigal Pharmaceuticals) Predictability Rank

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What is Madrigal Pharmaceuticals 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.

Madrigal Pharmaceuticals 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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Madrigal Pharmaceuticals (Madrigal Pharmaceuticals) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Healthcare » Biotechnology » Madrigal Pharmaceuticals Inc (NAS:MDGL) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

YDO1:Germany

Address

200 Barr Harbor Drive, Suite 200, Four Tower Bridge, West Conshohocken, PA, USA, 19428

Website

http://www.madrigalpharma.com

Madrigal Pharmaceuticals Inc is a clinical-stage biopharmaceutical company. It focuses on the development and commercialization of therapeutic candidates for the treatment of cardiovascular-metabolic diseases and non-alcoholic steatohepatitis (NASH). The product portfolio of the company includes MGL-3196, an orally administered, small-molecule liver-directed B-selective THR agonist, which is used for the treatment of non-alcoholic steatohepatitis and familial hypercholesterolemia. Also, MGL-3196 reduces triglycerides in the plasma and liver by increasing fat metabolism and shows an anti-diabetic action.

Executives

Robert E. Waltermire	officer: Senior VP, Chief Pharma Dev.	FOUR TOWER BRIDGE, 200 BARR HARBOR DRIVE, SUITE 200, WEST CONSHOHOCKEN PA 19428
Baker Bros. Advisors Lp	director	860 WASHINGTON STREET, 3RD FLOOR, NEW YORK NY 10014
Brian Joseph Lynch	officer: SVP and General Counsel	480 MORRIS ROAD, BLUE BELL PA 19422
William John Sibold	director, officer: President and CEO	C/O MADRIGAL PHARMACEUTICALS, INC., FOUR, TOWER BRIDGE, 200 BARR HARBOR DR STE 200, WEST CONSHOHOCKEN PA 19428
Felix Baker	director	BAKER BROS. ADVISORS LP, 860 WASHINGTON STREET 3RD FLOOR, NEW YORK NY 10014
Raymond Cheong	director	860 WASHINGTON STREET, 3RD FLOOR, NEW YORK NY 10014
Baker Bros. Advisors (gp) Llc	director	860 WASHINGTON STREET, 3RD FLOOR, NEW YORK NY 10014
Julian Baker	director	BAKER BROS. ADVISORS LP, 860 WASHINGTON STREET 3RD FLOOR, NEW YORK NY 10014
Baker Brothers Life Sciences Lp	director	860 WASHINGTON STREET, 3RD FLOOR, NEW YORK NY 10014
L.p. 667,	director	860 WASHINGTON STREET, 3RD FLOOR, NEW YORK NY 10014
Richard S Levy	director	860 WASHINGTON STREET, 3RD FLOOR, NEW YORK NY 10014
Remy Sukhija	officer: SVP and Chief Comm'l Officer	48 PHEASANT HILL ROAD, PRINCETON NJ 08540
Alex G. Howarth	officer: Chief Financial Officer	C/O AKCEA THERAPEUTICS, INC., 22 BOSTON WHARF ROAD, 9TH FLOOR, BOSTON MA 02210
Bay City Capital Llc	10 percent owner	750 BATTERY STREET STE 400, SAN FRANCISCO CA 94111
Fred B Craves	director, 10 percent owner	750 BATTERY ST, STE 600, SAN FRANCISCO CA 94111