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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, BRC's Probability of Financial Distress (%) is 0.13%.
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 Packaged Foods subindustry, BRC'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 Consumer Packaged Goods industry and Consumer Defensive sector, BRC's Probability of Financial Distress (%) distribution charts can be found below:
* The bar in red indicates where BRC'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 |
= | -6.62 |
The Probability of Financial Distress (%) (PFD) was then obtianed by:
PFD | = | 1 | / | (1 + e^(-LPFD)) | * | 100% |
= | 0.13% |
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).
BRC (NYSE:BRCC) 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 BRC's Probability of Financial Distress (%) provided by GuruFocus.com. Please click on the following links to see related term pages.
Glenn W. Welling | director, 10 percent owner | 610 NEWPORT CENTER DRIVE, SUITE 950, NEWPORT BEACH CA 92660 |
Thomas E Davin | director, officer: Co-Chief Executive Officer | |
Kathryn P Dickson | director | 1245 CEDAR LAKE ROAD S., MINNEAPOLIS MN 55416 |
Andrew J. Mccormick | officer: Gen. Counsel & Corp. Secretary | C/O LAIRD SUPERFOOD, INC., 275 W. LUNDGREN MILL DRIVE, SISTERS OR 97759 |
Stephen M Kadenacy | officer: CFO | C/O AECOM TECHNOLOGY CORPORATION, 555 S. FLOWER STREET, SUITE 3700, LOS ANGELES CA 90071 |
Christopher John Clark | officer: CTO & COO | 1250 S. CAPITAL OF TEXAS HIGHWAY, BUILDING 2, SUITE 285, AUSTIN TX 78746 |
Christopher Mondzelewski | officer: President and CMO | C/O BRC INC., 1144 S 500 W, SALT LAKE CITY UT 84101 |
Steven Taslitz | director | C/O STERLING PARTNERS, 401 NORTH MICHIGAN AVENUE, SUITE 3300, CHICAGO IL 60611 |
George Munoz | director | C/O MARRIOTT INTERNATONAL INC, 10400 FERNWOOD ROAD, BETHESDA MD 20817 |
Roland Smith | director, officer: Executive Chairman | 2951 28TH STREET, SANTA MONICA CA 90405 |
Heath Richard Nielsen | officer: Chief Retail Officer | 1250 S. CAPITAL OF TEXAS HIGHWAY, BUILDING 2, SUITE 285, AUSTIN TX 78746 |
Gregory James Iverson | officer: Chief Financial Officer | 4025 S. RIVERPOINT PARKWAY, CF-K809, PHOENIX AZ 85040 |
Kristina A Braendel | officer: Chief Accounting Officer | C/O BRC INC., 1144 S. 500 W, SALT LAKE CITY UT 84101 |
Engaged Capital Co-invest Xiii, Lp | other: See Footnote 1 | 610 NEWPORT CENTER DRIVE, SUITE 250, NEWPORT BEACH CA 92660 |
Engaged Capital Llc | 10 percent owner | 610 NEWPORT CENTER DRIVE, SUITE 950, NEWPORT BEACH CA 92660 |
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