IPG Photonics (IPG Photonics) Predictability Rank

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What is IPG Photonics 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.

IPG Photonics 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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IPG Photonics (IPG Photonics) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Technology » Semiconductors » IPG Photonics Corp (NAS:IPGP) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

IPF:Germany

Address

377 Simarano Drive, Marlborough, MA, USA, 01752

Website

https://www.ipgphotonics.com

IPG Photonics Corp is a vertically integrated developer and manufacturer of high-performance fiber lasers, fiber amplifiers, and diode lasers, which are used in diverse applications in the manufacturing, automotive, industrial, aerospace, semiconductor, and consumer end markets. A large majority of the firm's revenue is derived from materials processing applications for fiber lasers, including cutting and welding, marking and engraving, and micro-processing. Roughly a third of the firm's revenue is generated in China, with the rest coming from North America, Europe, Japan, Australia, and other countries across the world.

Executives

Eric Meurice	director	% VERIGY LTD, 5301 STEVENS CREEK BLVD, SANTA CLARA CA 95051
Valentin Gapontsev Trust I	10 percent owner	50 OLD WEBSTER ROAD, OXFORD MA 01540
Tang Agnes	director	C/O IPG PHOTONICS CORPORATION, 50 OLD WEBSTER ROAD, OXFORD MA 01540
Kolleen T Kennedy	director	VARIAN MEDICAL SYSTEMS INC, 3100 HANSEN WAY MAIL STOP E327, PALO ALTO CA 94304
Alexander Ovtchinnikov	officer: Vice President	IPG PHOTONICS CORPORATION, 50 OLD WEBSTER ROAD, OXFORD MA 01540
Jeanmarie F. Desmond	director	C/O E.I. DU PONT DE NEMOURS AND COMPANY, 974 CENTRE ROAD, BLDG. 730, WILMINGTON DE 19805
Eugene A Shcherbakov	director, officer: Managing Director of IPG Laser	IPG PHOTONICS CORPORATION, 50 OLD WEBSTER ROAD, OXFORD MA 01540
Gregory R Beecher	director	C/OTERADYNE INC, 600 RIVERPARK DRIVE, NORTH READING MA 01864
Timothy Pv Mammen	officer: Vice President & CFO	IPG PHOTONICS CORPORATION, 50 OLD WEBSTER ROAD, OXFORD MA 01540
Ip Fibre Devices Ltd	10 percent owner	660 MAIN STREET, STURBRIDGE MA 01566
Trevor Ness	officer: VP World-Wide Sales and Mktg.	C/O 50 OLD WEBSTER ROAD, OXFORD MA 01540
Igor Samartsev	director, officer: Acting GM of NTO IRE-Polus	IPG PHOTONICS CORPORATION, 50 OLD WEBSTER ROAD, OXFORD MA 01540
Angelo P Lopresti	officer: VP, Secretary & Gen Counsel	IPG PHOTONICS CORPORATION, 50 OLD WEBSTER ROAD, OXFORD MA 01540
Felix I Stukalin	officer: SVP, North America Operations
Natalia Pavlova	director	3 ORCHARD HILL ROAD, WESTBOROUGH MA 01581