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Probability of Financial Distress (%) measures the probability that a company will go bankrupt in the upcoming year given its current financial position. A higher ratio indicates a larger probability of bankruptcy for the company, while a lower ratio indicates a healthier fundamental. As of today, Cidara Therapeutics's Probability of Financial Distress (%) is 8.77%.
Like the Altman Z-Score, the PFD measures a company's bankruptcy risk. However, the main drawback of the Z-score is it does not apply to banks and insurance companies. According to Investopedia, the concept of "working capital" does not apply to banks and insurance companies, as financial institutions do not have typical current assets or current liabilities like inventories or accounts payable.
For the Biotechnology subindustry, Cidara Therapeutics's Probability of Financial Distress (%), along with its competitors' market caps and Probability of Financial Distress (%) data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
For the Biotechnology industry and Healthcare sector, Cidara Therapeutics's Probability of Financial Distress (%) distribution charts can be found below:
* The bar in red indicates where Cidara Therapeutics's Probability of Financial Distress (%) falls into.
Probability of Financial Distress (%) (PFD) was developed by John Campbell, Jens Hilscher and Jan Szilagyi in their Search of Distress Risk. It measures the probability that a company will go bankrupt within the next 12 months given its current financial position.
The Probability of Financial Distress (%) was obtained by a logit probability model based on eight explanatory variables. The logit formula to compute the probability of financial distress (LPFD) is given below:
LPFD | = | -20.12 * NIMTAAVG | + | 1.60 * TLMTA | - | 7.88 * EXRETAVG | + | 1.55 * SIGMA | - | 0.005 * RSIZE | - | 2.27 * CASHMTA | + | 0.070 * MB | - | 0.09 * PRICE | - | 8.87 |
= | -2.34 |
The Probability of Financial Distress (%) (PFD) was then obtianed by:
PFD | = | 1 | / | (1 + e^(-LPFD)) | * | 100% |
= | 8.77% |
The eight explanatory variables are:
1. NIMTAAVG = Net Income to Market Total Assets
NIMTAAVG | = | Net Income | / | Market Total Assets |
= | Net Income | / | (Market Cap + Total Liabilities) |
*Note that for companies reported quarterly, geometrically declining weighted quarterly Net Income data in latest four quarters are used.
2. TLMTA = Total liabilities to Market Total Assets
TLMTA | = | Total Liabilities | / | Market Total Assets |
3. CASHMTA = Cash to Market Total Assets
For non-financial companies, CASHMTA is measured as:
CASHMTA | = | Cash, Cash Equivalents, Marketable Securities | / | Market Total Assets |
4. EXRETAVG = Excess Return compared to the S&P 500
EXRETAVG is the weighted excess return compared to the S&P 500 in past 12 month. Geometrically declining weights are imposed on the monthly excess return to reflect lagged information. The weight is halved each quarter.
5. SIGMA = Standard Deviation of Daily Returns
For sigma, we use the annualized standard deviation of a company's returns over the past 92 days (or 63 trading days).
6. RSIZE = Relative Size
RSIZE | = | log (Market Cap | / | Total Market Cap of S&P 500 companies) |
7. MB = Market to Adjusted Book Equity Ratio
MB | = | Market Cap | / | Adjusted Book Equity |
= | Market Cap | / | (Total Stockholders Equity + 0.1 * ( Market Cap - Total Stockholders Equity)) |
8. PRICE
PRICE is measured as the log of the stock price, capped at log(15).
Cidara Therapeutics (NAS:CDTX) Probability of Financial Distress (%) Explanation
Like the Altman Z-Score, the PFD measures a company's bankruptcy risk in the upcoming year. However, the main drawback of the Z-score is it does not apply to banks and insurance companies. According to Investopedia, the concept of "working capital" does not apply to banks and insurance companies, as financial institutions do not have typical current assets or current liabilities like inventories or accounts payable.
Thank you for viewing the detailed overview of Cidara Therapeutics's Probability of Financial Distress (%) provided by GuruFocus.com. Please click on the following links to see related term pages.
Leslie Tari | officer: Chief Scientific Officer | C/O CIDARA THERAPEUTICS, INC., 6310 NANCY RIDGE DR SUITE 101, SAN DIEGO CA 92121 |
Taylor Sandison | officer: Chief Medical Officer | 6310 NANCY RIDGE DRIVE, SAN DIEGO CA 92121 |
Jeffrey Stein | director, officer: President & CEO | 6310 NANCY RIDGE DRIVE, SUITE 101, SAN DIEGO CA 92121 |
Shane Ward | officer: CHIEF LEGAL OFFICER | C/O VERSARTIS, INC., 4200 BOHANNON DR., SUITE 250, MENLO PARK CA 94025 |
Preetam Shah | officer: CFO & CBO | C/O BRAINSTORM CELL THERAPEUTICS, INC., 1325 AVENUE OF AMERICAS, 28TH FLR., NEW YORK NY 10019 |
Paul Daruwala | officer: Chief Medical Officer | 6310 NANCY RIDGE DR, SAN DIEGO CA 92121 |
Brady Johnson | officer: Dir. of Finance & Controller | 6310 NANCY RIDGE DRIVE, SAN DIEGO CA 92121 |
Timothy R Franson | director | 320 WAKARA WAY, SALT LAKE CITY UT 84108 |
Carin Canale-theakston | director | C/O CIDARA THERAPEUTICS, INC., 6310 NANCY RIDGE DR STE 101 CA 92121 |
Bonnie L Bassler | director | REGENERON PHARMACEUTICALS, INC., 777 OLD SAW MILL RIVER ROAD, TARRYTOWN NY 10591 |
James E. Levine | officer: Chief Financial Officer | 55 CAMBRIDGE PARKWAY, 8TH FLOOR, CAMBRIDGE MA 02142 |
Theodore R Schroeder | director | 12481 HIGH BLUFF DRIVE, SUITE 200, SAN DIEGO CA 92130 |
Chrysa Mineo | director | 10835 ROAD TO THE CURE, SUITE 205, SAN DIEGO CA 92121 |
David L Gollaher | director | 6310 NANCY RIDGE DR, SAN DIEGO CA 92121 |
Daniel D Burgess | director | C/O HOLLIS-EDEN PHARMACEUTICALS, 4435 EASTGATE MALL STE.400, SAN DIEGO CA 92121 |
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