SmileDirectClub (SmileDirectClub) Predictability Rank

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What is SmileDirectClub Predictability Rank?

Not Rated

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.

SmileDirectClub 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

SmileDirectClub Predictability Rank Related Terms

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SmileDirectClub (SmileDirectClub) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Healthcare » Medical Devices & Instruments » SmileDirectClub Inc (OTCPK:SDCCQ) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

N/A

Address

414 Union Street, Nashville, TN, USA, 37219

Website

https://www.smiledirectclub.com

SmileDirectClub Inc is engaged in the orthodontics business. It is mainly involved in the sale of aligners, impression kits, whitening gel, and retainers. The company has one operating segment, aligner products.

Executives

Richard F Wallman	director	HONEYWELL, 101 COLUMBIA ROAD, MORRISTOWN NJ 07962
Susan Greenspon Rammelt	director, officer: General Counsel, Sec. and Dir.	C/O SMILEDIRECTCLUB, INC., 414 UNION STREET, NASHVILLE TN 37219
Alexander Dimitrief	director	GENERAL ELECTRIC COMPANY, 41 FARNSWORTH STREET, BOSTON MA 02210
Linda Marie Williams	director	C/O SMILEDIRECTCLUB, INC., 414 UNION STREET, NASHVILLE TN 37219
Cd&r Investment Associates X, Ltd.	10 percent owner	CLAYTON, DUBILIER & RICE, LLC, 375 PARK AVENUE, 18TH FLOOR, NEW YORK NY 10152
Kay Oswald	officer: President of International	C/O SMILEDIRECTCLUB, INC., 414 UNION STREET, NASHVILLE TN 37219
Ward Edward W Iii	director	SMILEDIRECTCLUB, INC., 414 UNION STREET, NASHVILLE TN 37219
Steven B. Katzman	director, officer: COO and Director	C/O SMILEDIRECTCLUB, INC., 414 UNION STREET, NASHVILLE TN 37219
David B Katzman	director, officer: CEO and Chairman	100 GALLERIA OFFICECENTRE, SUITE 419, SOUTHFIELD MI 48034
Jordan M. Katzman	director	C/O SMILEDIRECTCLUB, INC., 414 UNION STREET, NASHVILLE TN 37219
Kyle Wailes	officer: Chief Financial Officer	C/O SMILEDIRECTCLUB, INC., 414 UNION STREET, NASHVILLE TN 37219
Troy W. Crawford	officer: Chief Accounting Officer	C/O GAMESTOP CORP., 625 WESTPORT PARKWAY, GRAPEVINE TX 76051
Carol Hamilton	director	C/O SMILEDIRECTCLUB, INC., 414 UNION STREET, NASHVILLE TN 37219
William H. Frist	director	600 MONTGOMERY STREET, SAN FRANCISCO CA 94111
Cd&r Sdc Holdings, L.p.	10 percent owner	MAPLES CORP SERVICES LTD, P.O. BOX 309, UGLAND HOUSE, SOUTH CHURCH STREET, GRAND CAYMAN E9 KY1-1104