Within this report published monthly, credit worthiness measures for each of over 4000 public companies are provided along with comparison to industry peer norms. Uses of Corporate Credit Outlook include credit evaluation for loan officers and credit managers, investment analysis for stockbrokers or individual investors, insurance underwriting research for evaluating potential risk, and corporate management analysis for evaluating potential acquisition/divestiture/restructuring scenarios.
In 1968, Edward Altman, a financial economist and professor at New York University’s Stern School of Business, developed the Z score which predicts corporate bankruptcy within one to two years. Studies have shown the model to be accurate with over 70% reliability. It was originally applied to manufacturing firms but has since been modified to apply also to service firms.
For each company in Corporate Credit Outlook, a Z score value is calculated from the latest published quarterly financial statements as well as an estimate for four quarters in the future. The Z Score is an index of corporate creditworthiness based on Altman’s multiple discriminant analysis of financial data used to predict bankruptcy. The higher the Z score, the stronger the firm. Values above 3.0 indicate a strong, creditworthy company. Low Z scores, particularly below 1.8 indicate a company can potentially become a credit problem for suppliers, lenders, bond and equity holders. Negative values are especially indicative of problem companies which may have future credit difficulties.
Future values for liquidity as measured by the current ratio, productivity of capital as measured by total asset turnover, return on assets, effective interest rate, interest coverage ratio, cash generation rate, capital adequacy, excess cash flow, variation in net income and percent change in net income are also presented. For each industry peer group, mean values for the companies within the group are presented.
The PDF report can be used as a reference in which to look up information for a specific company. Or the reader can compare all companies within a given industry group presented together. Listings are provided of the 1000 least creditworthy companies based on Z score and the 1000 most eroding credit companies based on change in Z score over time. Also included is a compilation of the company with the most under-performing credit expected in each industry group.
The two database files are in Excel format, one containing information by company and the other information by industry.