Floor & Decor Holdings (Floor & Decor Holdings) Predictability Rank

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What is Floor & Decor Holdings 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.

Floor & Decor Holdings 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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Floor & Decor Holdings (Floor & Decor Holdings) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Consumer Cyclical » Retail - Cyclical » Floor & Decor Holdings Inc (NYSE:FND) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

FND:Mexico 1FD:Germany

Address

2500 Windy Ridge Parkway SE, Atlanta, GA, USA, 30339

Website

https://www.flooranddecor.com

Floor & Decor Holdings Inc operates as a specialty retailer in the hard surface flooring market. Its stores offer a range of tile, wood, laminate, and natural stone flooring products, as well as decorative and installation accessories at everyday low prices. It appeals to a variety of customers including professional installers, commercial businesses, Do It Yourself (DIY) customers, and customers who buy the products for professional installation. Geographically, the group has a presence in the US region and also offers its product through an e-commerce site.

Executives

David Victor Christopherson	officer: SVP & General Counsel	2233 LAKE PARK DRIVE, STE. 400, SMYRNA GA 30080
Thomas V Taylor	director, officer: Chief Executive Officer	2233 LAKE PARK DRIVE, STE. 400, SMYRNA GA 30080
Steven Alan Denny	officer: EVP, Store Operations	C/O FLOOR & DECOR HOLDINGS, INC., 2500 WINDY RIDGE PARKWAY SE, ATLANTA GA 30339
Melissa Kersey	director	TRACTOR SUPPLY, 5401 VIRGINIA WAY, BRENTWOOD TN 37027
Richard L Sullivan	director	2233 LAKE PARK DRIVE, SMYRNA GA 30080
Bryan Langley	officer: EVP & Chief Financial Officer	C/O FLOOR & DECOR HOLDINGS, INC., 2500 WINDY RIDGE PARKWAY SE, ATLANTA GA 30339
Luke Olson	officer: Chief Accounting Officer	C/O FLOOR & DECOR HOLDINGS, INC., 2500 WINDY RIDGE PARKWAY SE, ATLANTA GA 30339
Ryan Marshall	director	24311 WALDEN CENTER DR, STE 300, BONITA SPRINGS FL 34134
William T Giles	director	123 S. FRONT STREET, DEPT. 8074, MEMPHIS TN 38103
Felicia D Thornton	director	250 PARKCENTER BLVD PO BOX 20, BOISE ID 83726
Ersan Sayman	officer: EVP - MERCHANDISING	C/O FLOOR & DECOR HOLDINGS, INC., 2500 WINDY RIDGE PARKWAY SE, ATLANTA GA 30339
Peter Starrett	director
Brian K Robbins	officer: EVP-Supply Chain	2233 LAKE PARK DRIVE, SMYRNA GA 30080
Dwight Lamar James	director	C/O FLOOR & DECOR HOLDINGS, INC., 2500 WINDY RIDGE PARKWAY, SE, ATLANTA GA 30339
Norman Axelrod	director