Encompass Health (Encompass Health) Predictability Rank

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What is Encompass Health 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.

Encompass Health 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

Encompass Health Predictability Rank Related Terms

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Encompass Health (Encompass Health) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Healthcare » Healthcare Providers & Services » Encompass Health Corp (NYSE:EHC) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

HSOA:Germany

Address

9001 Liberty Parkway, Birmingham, AL, USA, 35242

Website

https://www.encompasshealth.com

Encompass Health Corp provides post-acute healthcare services in the United States through a network of inpatient rehabilitation hospitals. Inpatient rehabilitation contributes the majority of the firm's revenue and provides specialized rehabilitative treatment through a network of inpatient hospitals. These hospitals are concentrated in the eastern half of the United States and Texas.

Executives

Douglas E Coltharp	officer: EVP, Chief Financial Officer	C/O UNDER ARMOUR, INC., 1020 HULL STREET, BALTIMORE MD 21230
Elissa Joy Charbonneau	officer: Chief Medical Officer	24 HAWTHORNE CIRCLE, YARMOUTH ME 04096
Mark J Tarr	officer: Executive VP Operations	C/O ENCOMPASS HEALTH CORPORATION, 9001 LIBERTY PARKWAY, BIRMINGHAM AL 35242
Greg D Carmichael	director
Kevin J. O'connor	director	13995 PASTEUR BOULEVARD, PALM BEACH GARDENS FL 33418
Terrance Williams	director	7184 BIDDICK, NEW ALBANY OH 43054
Christopher R Reidy	director	ONE ADP BLVD, ROSELAND NJ 07068
Andrew L Price	officer: Interim Chief Accting Officer	3660 GRANDVIEW PARKWAY, SUITE 200, BIRMINGHAM AL 35243
Barbara Ann Jacobsmeyer	officer: EVP, Operations	2122 ACTON PARK WAY, BIRMINGHAM AL 35243
Donald L Correll	director	C/O INTERCHANGE FINANCIAL SERVICES CORP, PARK 80 W PLAZA TWO, SADDLE BROOK NJ 07663
Anthony April Kaye Bullock	officer: CEO and President, Encompass	3606 PRINCETON AVENUE, DALLAS TX 75205
Higdon Leo I Jr	director	1700 LINCOLN STREET, 28TH FLOOR, DENVER CO 80203
Patricia Anne Maryland	director	7342 HORIZON DRIVE, WEST PALM BEACH FL 33412
Yvonne M Curl	director	C/O ENHABIT, INC., 6688 N. CENTRAL EXPRESSWAY, SUITE 1300, DALLAS TX 75206
Cheryl B. Levy	officer: Chief Human Resources Officer	3137 BROOK HIGHLAND DRIVE, BIRMINGHAM AL 35242