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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, NewAge's Probability of Financial Distress (%) is 0.00%.
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 Beverages - Non-Alcoholic subindustry, NewAge'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 Beverages - Non-Alcoholic industry and Consumer Defensive sector, NewAge's Probability of Financial Distress (%) distribution charts can be found below:
* The bar in red indicates where NewAge'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 |
= | 0.00 |
The Probability of Financial Distress (%) (PFD) was then obtianed by:
PFD | = | 1 | / | (1 + e^(-LPFD)) | * | 100% |
= | 0.00% |
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).
NewAge (OTCPK:NBEVQ) 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 NewAge's Probability of Financial Distress (%) provided by GuruFocus.com. Please click on the following links to see related term pages.
Michele Crocker | director | 7158 FLSMIDTH DRIVE, SUITE 250 MIDVALE UT 84047 |
Judith Lynne Hammerschmidt | director | 3511 CAMBRIDGE ROAD, DURHAM 1W 27707-4509 |
Ed Brennan | director | 3018 WEST LAKE ROAD SKANEATELES NY 13152 |
Kevin Manion | officer: Chief Financial Officer | 1141 CUMMINGS ROAD, SANTA PAULA CA 93060 |
Fred W Cooper | director | 3838 W PARKWAY BLVD, C/O USANA HEALTH SCIENCES INC, SALT LAKE CITY UT 84120 |
Reginald Kapteyn | director | 16325 WEST WILLOW DRIVE SPRING LAKE MI 49456 |
Amy L. Kuzdowicz | director | 2376 TALL OAKS DRIVE TROY MI 48098 |
Gregory Fea | director | 1700 EAST 68TH AVENUE DENVER CO 80229 |
David Vanderveen | officer: Chief Operating Officer | 2420 17TH STREET, SUITE 220 DENVER CO 80202 |
Alicia Syrett | director | 2420 17TH STREET, SUITE 220, DENVER CO 80202 |
Timothy J Haas | director | ONE COCA COLA PLAZA ATLANTA GA 30313 |
Julie Garlikov | officer: Chief Marketing Officer | 2420 17TH STREET, SUITE 220, DENVER CO 80202 |
Brent D Willis | director, officer: CEO | 4211 W BOY SCOUT BLVD, SUITE 290, TAMPA FL 33607 |
Gregory A Gould | officer: CFO | 1111 MAIN STREET, SUITE 660, VANCOUVER WA 98660 |
Richard C Rife | officer: See Remarks | 1903 N HEATHER DRIVE OREM UT 84097 |
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