Altman Z-score

[nsx5200]

Came across this interesting metric while going through the Tesla fanboy reddit forum.

 

Wiki had this to say: "[...]model was found to be approximately 80–90% accurate in predicting bankruptcy one year before the event[...]"

 

Mainly developed for asset heavy manufacturing companies, but there have been tweaks/updates for other types(asset light) of companies as well.

 

Seems like this commonly taught in finance academically.  Just curious if anybody uses it in their work flow, and how much value it really adds(mainly if it's really as predictive as wiki claims)?  I don't know if there are any short sellers that frequent this forum,, but I would imagine such a metric be interesting for them, similar to *ckedcompany during the dot.com's.

 

Some companies that look like good candidates for buying LEAP puts, according to this metric are:

Ford and Boeing.  Interestingly enough, pretty much all the US airlines flashes red with this metrics.

[Spekulatius]

It’s useful for bankruptcy prediction and to quantify financial stress. I have heard about it first around 2002 when there were a lot of bankruptcies in the wake of the recession and this tool was popularized. YOu can get this number for free with a lot of stocks at Gurufocus in the summary page:

https://www.gurufocus.com/stock/AAPL/summary

 

I might ask tikr support to calculate this number and include it in their overview  or ratio page . Should be relatively easy to do because they already have all the input variables there and they are generally open for suggestions 

Edited 1 hour ago by Spekulatius