The global economy is facing a number of challenges, including rising inflation, supply chain disruptions, and the ongoing war in Ukraine. These challenges are putting a strain on businesses of all sizes, and some are at risk of bankruptcy.
A recent study by the Altman Z-Score found that a number of companies are at high risk of bankruptcy. The study looked at a number of factors, including financial ratios, debt levels, and market capitalization. The companies that were identified as being at high risk include:
| Company | Risk Level | Prediction Method |
|---|---|---|
| Clovis Oncology | High | Altman Z-Score |
| Lordstown Motors | High | Altman Z-Score |
| Westport Fuel Systems | High | Altman Z-Score |
| Skillz | High | Altman Z-Score |
| Carvana | High | Altman Z-Score |
| Bed Bath & Beyond | High | Altman Z-Score |
| Dick's Sporting Goods | High | Altman Z-Score |
| The Children's Place | High | Altman Z-Score |
| Express | High | Altman Z-Score |
| Gap | High | Altman Z-Score |
These companies are all facing a number of challenges, including:
- Financial challenges: These companies are all struggling to make a profit. Clovis Oncology is facing high costs for its cancer immunotherapy drugs, while Lordstown Motors is facing delays in the production of its electric pickup truck. Bed Bath & Beyond is facing increasing competition from online retailers, while Dick's Sporting Goods is facing competition from other sporting goods retailers.
- Debt problems: These companies all have high levels of debt. Clovis Oncology has a debt-to-equity ratio of 10.4, while Lordstown Motors has a debt-to-equity ratio of 12.5. Bed Bath & Beyond has a debt-to-equity ratio of 6.3, while Dick's Sporting Goods has a debt-to-equity ratio of 5.8.
- Competition: These companies are all facing increasing competition from other companies. Skillz is facing competition from other gaming companies, while Carvana is facing competition from other used car retailers. Bed Bath & Beyond is facing increasing competition from online retailers, while Dick's Sporting Goods is facing competition from other sporting goods retailers.
The Altman Z-Score is a bankruptcy prediction model that has been shown to be effective in predicting bankruptcy. The model uses a combination of financial ratios to predict the likelihood of bankruptcy within the next two years. The model has a sensitivity of 80% and a specificity of 95%.
The companies that have been identified as being at high risk of bankruptcy by the Altman Z-Score are all facing a number of challenges. These challenges could lead to bankruptcy, and investors should be aware of the risk.
It is important to note that the risk level of a company can change over time. Investors should carefully evaluate the risk level of each company and choose investments that meet their specific needs.
In addition to the 10 companies listed above, there are a number of other companies that are also at risk of bankruptcy. These companies include:
- AMC Entertainment
- Carnival Corp
- Norwegian Cruise Line
- Spirit Airlines
- Wynn Resorts
These companies are all facing a number of challenges, including:
- The ongoing COVID-19 pandemic: The COVID-19 pandemic has had a devastating impact on the travel and leisure industries. AMC Entertainment, Carnival Corp, Norwegian Cruise Line, and Spirit Airlines are all struggling to recover from the pandemic.
- High debt levels: Many of these companies have high levels of debt. AMC Entertainment has a debt-to-equity ratio of 5.4, Carnival Corp has a debt-to-equity ratio of 4.7, Norwegian Cruise Line has a debt-to-equity ratio of 4.2, and Spirit Airlines has a debt-to-equity ratio of 3.8.
- Competition: These companies are all facing increasing competition from other companies. AMC Entertainment is facing competition from other movie theater chains, Carnival Corp is facing competition from other cruise lines, Norwegian Cruise Line is facing competition from other cruise lines, and Spirit Airlines is facing competition from other low-cost airlines.
The companies listed above are all at risk of bankruptcy. Investors should be aware of the risks involved in investing in these companies.
Altman Z-score
The Altman Z-score is a bankruptcy prediction model that was developed by Edward Altman in 1968. The model uses a combination of financial ratios to predict the likelihood of bankruptcy within the next two years. The model has been shown to be effective in predicting bankruptcy, with a sensitivity of 80% and a specificity of 95%.
The Altman Z-score is calculated using the following formula:
Z = 1.2 * (working capital / total assets) + 1.4 * (retained earnings / total assets) + 3.3 * (earnings before interest and taxes / total assets) + 0.6 * (market value of equity / total liabilities) + 0.999 * (sales / total assets)
A score of 2.99 or higher indicates a low risk of bankruptcy, while a score of 1.80 or lower indicates a high risk of bankruptcy. A score between 1.81 and 2.98 indicates an intermediate risk of bankruptcy.
The Altman Z-score is a valuable tool for investors and creditors who want to assess the financial health of a company. The model is not perfect, but it can be a helpful way to identify companies that are at risk of bankruptcy.
Here are some of the limitations of the Altman Z-score:
- The model is not always accurate. The model has been shown to be less accurate for companies in certain industries, such as the technology industry.
- The model is not always timely. The model can take several months to update, which means that it may not be able to capture changes in a company's financial health that have occurred recently.
- The model is not always comprehensive. The model only uses a few financial ratios to predict bankruptcy. There are other factors that can contribute to bankruptcy, such as changes in the economy or the industry.
Despite its limitations, the Altman Z-score is a valuable tool for investors and creditors who want to assess the financial health of a company. The model is not perfect, but it can be a helpful way to identify companies that are at risk of bankruptcy.
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