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Company Financial Health Analyzer

Professional investors identified poor financial health, poor business models and poor management are the most common causes of underperforming stocks. The most common cause of grief is poor financial health. Use this tool to protect your investment by ensuring the stocks you invested in are financially strong.

+Features

  • Calculates the popular Altman Z-Score for assessing the financial health of a business.
  • Computes the well-known Piotroski F-Score for identifying companies with improving financial performance and health.
  • Estimates the number of years it would take to pay off long-term debts to give you an idea of the company’s debts load.
  • Calculates the financial leverage ratio to see if the company is conservatively run.
  • Generates visual chart showing the company’s long-term and short-term debts trend over a period.

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Financial Health Analysis for "WPP WPP PLC"

Altman Z-Score: Score 2.99 or more is healthy, 1.81 or less is unhealthy, between 1.82 and 2.98 is in the grey area.

  • Altman Z-Score

  • Latest Z-Score Health Indicator

  • Components For Latest Z-Score

    Working capital to total assets -0.09
    Accumulated retained earnings to total assets 0.13
    EBIT to total assets 0.02
    Market value to total liabilities 0.39
    Sales to total assets 0.56
    WPP PLC Z-Score 0.94

Piotroski F-Score: Score 8 or more is healthy, 2 or less is unhealthy, anything else is average.

  • Piotroski F-Score

  • Latest F-Score Health Indicator

  • Components For Latest F-Score

    Positive net income 1
    Positive operating cashflow 1
    Improved return on assets 0
    Operating cashflow larger than net profit 1
    Reduced long-term debts 0
    Improved working capital 1
    Negligible ordinary shares increased 1
    Improved gross margin 0
    Improved asset turnover 1
    * Low total liabilities to EBITD -1
    * Low total liabilities to operating cashflow 0
    WPP PLC F-Score 5

Long-Term Debts Pay Off & Financial Leverage

  • No. of Years to Pay Off Long-Term Debts Using Cashflow

    • Three years or less to pay off debts is ideal
    • Weighted average cashflow is used in the calculation

  • Financial Leverage Ratio

    • Conservatively run company operates below 2.5

Interest-Bearing Debts & Net Cash

Interest-Bearing Debts & Net Cash Analysis
Net cash to total assets
-14.2%
Trailing 12 months
  • Negative % indicates net debts

Summary

  • Latest Z-Score is 0.94. This is unhealthy. Bankruptcy risk is very high.
  • Latest F-Score is 5. Financial health is average.
  • The company has £5,637,000,000 long-term interest-bearing debts. 21.2% of total funds.
  • The company's £5,637,000,000 long-term interest-bearing debts can take 4 years to pay off by cash flow.
  • Latest financial leverage ratio is 7.9 which is a bit risky.

Overall Financial Health Rating

+Tips & Advice

  • In a series of tests covering 3 different time periods spans over 31 years the Altman Z-Score model proved with approximately 80% - 90% accuracy in predicting bankruptcy one year prior to the event.
  • For publicly held companies, Altman regards companies that scored greater than 2.99 are in the Safe zone, 1.81 < Z-Score < 2.99 are in the Grey zone and Z-Score less than 1.81 are in the Distress Zone.
  • In 2009, Morgan Stanley used the Z-Score to rank a group of European companies and found that businesses with weak balance sheets underperformed the market more than two thirds of the time.
  • Altman Z-Score is not suitable for analyzing utility companies, property companies, banks, insurers and other financial services companies or relatively new companies with low profitability. The model favors long-established companies.
  • The Piotroski F-Score model can be used for separating strong and weak companies from a list of value stocks. The Piotroski’s April 2000 paper on Value Investing demonstrated that the F-Score model generated 23% annual return between 1976 and 1996 if the strongest were bought and the weakest were shorted.
  • Piotroski regards companies that scored 8 or 9 points as being the strongest and those that scored 2 or less were five times more likely to either go bankrupt or delist due to financial problems.
  • Companies whose Z-Score or F-Score is consistently improving from an unhealthy position may have a good chance for share price recovery.
  • Professional investors identified poor balance sheets, poor business models and poor management are the most common causes of underperforming stocks. The most common cause of grief is poor balance sheet. The sources of balance sheet weakness are significant bank debts or bonds relative to the company’s net worth or cash flow, pension fund deficits and redeemable preference shares or future liabilities.
  • Highly geared companies can increase returns for equity holders when things go well but are particularly exposed if business conditions change for the worse. Often need to fire sale the company’s best performing business divisions or most valuable assets to survive.
  • Investing in companies with strong balance sheet with significant net cash or liquid assets limits the downside and offers a reasonable upside. You shouldn’t lose too much money on these stocks and you may do very well.

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