Fair Isaac (Fair Isaac) Predictability Rank

View and export this data going back to 1987. Start your Free Trial

What is Fair Isaac 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.

Fair Isaac 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

Fair Isaac Predictability Rank Related Terms

Thank you for viewing the detailed overview of Fair Isaac's Predictability Rank provided by GuruFocus.com. Please click on the following links to see related term pages.

Fair Isaac (Fair Isaac) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Technology » Software » Fair Isaac Corp (NYSE:FICO) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

FICO1:Mexico FRI:Germany FRI:Germany

Address

5 West Mendenhall, Suite 105, Bozeman, MT, USA, 59715

Website

https://www.fico.com

Founded in 1956, Fair Isaac Corporation is a leading applied analytics company. Fair Isaac is primarily known for its FICO credit scores, which is a widely used industry benchmark to determine the creditworthiness of an individual consumer. The firm's credit scores business accounts for most of the firm's profits and consists of business-to-business and business-to-consumer offerings. In addition to scores, Fair Isaac also sells software primarily to financial institutions for areas such as analytics, decision-making, customer workflows, and fraud.

Executives

Steven P. Weber	officer: Interim Chief Financial Ofc.	5 WEST MENDENHALL, SUITE 105, BOZEMAN MT 59715
Eva Manolis	director	C/O SHUTTERFLY, INC., 2800 BRIDGE PARKWAY, REDWOOD CITY CA 94065
David A Rey	director	181 METRO DRIVE, SAN JOSE CA 95110
Michael S Leonard	officer: CAO and Vice President	181 METRO DRIVE, SAN JOSE CA 95110
Joanna Rees	director	LEAPFROG ENTERPRISES, INC., 6401 HOLLIS STREET SUITE 100, EMERYVILLE CA 94608
Braden R Kelly	director	181 METRO DRIVE, SAN JOSE CA 95110
Marc F Mcmorris	director	181 METRO DRIVE, SAN JOSE CA 95110
James M Wehmann	officer: Executive Vice President	181 METRO DRIVE, SAN JOSE CA 95110
Henry Tayloe Stansbury	director	C/O COUPA SOFTWARE INC., 1855 S. GRANT STREET, SAN MATEO CA 94402
Nikhil Behl	officer: Executive Vice President	601 108TH AVENUE NE, SUITE 1200, BELLEVUE WA 98004
Stephanie Covert	officer: Executive Vice President	181 METRO DR., SAN JOSE CA 95110
James Kirsner	director	5858 HORTON STREET, SUITE 350, EMERYVILLE CA 94608
Thomas A. Bowers	officer: Executive Vice President	181 METRO DR., #600, SAN JOSE CA 95110
Richard Deal	officer: Vice President	181 METRO DRIVE, SAN JOSE CA 95110
Mark R Scadina	officer: V.P., General Counsel & Sec.	181 METRO DRIVE, SAN JOSE CA 95110