What are the chances of your portfolio companies going bankrupt? And are they dressing up their books? Find out using our essential checks.
22-May-2023 •Research Desk
As an equity investor, we are sure you have found yourself asking the above questions. But these are difficult questions to answer. At least for those who don't have the luxury to spend hours behind research.
But for the readers of Value Research Online, it is as simple as clicking on the Overview tab of a company's stock page. There you will find three scores that can save you the hours of research required to answer the above questions.
The Altman Z-score
The Altman Z-score can be used to predict the likelihood of a business going bankrupt. Keep in mind that the score is based on an algorithm that predicts the probability of bankruptcy. A high Altman Z-score means there's a threat of bankruptcy, but the management may succeed in averting it. Read our detailed note about the Altman Z Score.
Piotroski F-Score
The Piotroski F-Score is an easy-to-use single number that gives an insight into the overall financial health of a company. Stocks are rated on a score of 0 to nine based on nine parameters, nine being the best. Since the score is based on recent performance, it represents the current financial strength relative to the recent past. Read our detailed note on the Piotroski F-Score.
Modified C-score
Modified's C-score alarms you against any accounting fraud. This probabilistic score measures a company's resemblance to other companies with a history of accounting fraud. The higher the C-score, the higher the probability that something is suspect. Our detailed note on the Modified C-score.
Together, these checks will ensure that your research efforts in any stock get off to a flying start.
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