5 More Companies That Are Distressing Investors
Today I offer five other companies, including Monster Worldwide, Level 3 Communications and Calpine.
The Altman-Z Score was developed by Edward Altman to help identify companies that may fall into bankruptcy. The quantitative scoring system combines five financial ratios using a company's balance sheet to categorize companies into several bankruptcy-probability buckets.
The five metrics of the Altman Z Score include working capital/total assets, retained earnings/total assets, EBIT/total assets, market value of equity/book value of total liabilities and sales/assets.
A company with an Altman Z score of less than 1.81 is considered to be in a "distress zone" and, therefore, according to Altman, is at a higher risk for bankruptcy versus its competitors.
Altman also developed a metric called the Double Prime Z Score specifically for non-manufacturing firms, a slight variation on the aforementioned model. It identifies distress levels as companies with a score less than 1.1.
TheStreet Ratings analyzed the Altman Z Scores of all U.S.-traded stocks and searched for notable companies with scores below the distress level. Below are five of them.
Monster Worldwide: (MWW)
TheStreet Ratings Recommendation: HOLD
Altman Z Score:0.89
Monster Worldwide, which runs the popular jobs website Monster.com, has come under competitive pressures as the company has failed to innovate and is now losing market share at the hands of LinkedIn. Despite the poor peformance, the company has said it would consider any offers for the company so there is potential that it could be acquired in the near term. Here's a snippet from our report:
"Sales and net income have dropped, underperforming the average competitor within its industry.
"Monster has weak liquidity. Currently, the quick ratio is 0.85, which shows a lack of ability to cover short-term cash needs.