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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, SPI Energy Co's Probability of Financial Distress (%) is 0.73%.
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 Solar subindustry, SPI Energy Co'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 Semiconductors industry and Technology sector, SPI Energy Co's Probability of Financial Distress (%) distribution charts can be found below:
* The bar in red indicates where SPI Energy Co'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 |
= | -4.91 |
The Probability of Financial Distress (%) (PFD) was then obtianed by:
PFD | = | 1 | / | (1 + e^(-LPFD)) | * | 100% |
= | 0.73% |
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).
SPI Energy Co (NAS:SPI) 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 SPI Energy Co's Probability of Financial Distress (%) provided by GuruFocus.com. Please click on the following links to see related term pages.
Dejun Ye | officer: Chief Executive Officer | ROOM 502, NO.16, LANE 28, EAST GUILIN ST, XUHUI DISTRICT, SHANGHAI F4 200235 |
Yunan Ren | director | C/O TIGER MEDIA, INC. ROOM 1705, 511 WEIHAI ROAD, JING AN DISTRICT, SHANGHAI F4 200041 |
Jing Liu | officer: Chief Financial Officer | RM 1708 YINGU PLZA NO.9 OF N 4TH, RING ROAD WEST HAIDIAN DISTRICT, BEIJING F4 100080 |
Gang Dong | director | 2512,COSCO TOWER, 183 QUEEN'S ROAD CENTRAL, SHEUNG WAN K3 852 |
Xiaofeng Pen | director | 7TH FLOOR, BUILDING B, 2145 LONG, JINSHAJIANG ROAD, PUTUO DISTRICT, SHANGHAI F4 200333 |
Hoong Khoeng Cheong | officer: Chief Operating Officer | #04-152, BLOCK 532, BUKIT BATOK ST 5 1, SINGAPORE U0 650532 |
Lang Zhou | director | LDK SOLAR, SAIWEI ROAD, HIGH-TEC ZONE, XINYU F4 338000 |
Xiahou Min | director, officer: Chief Executive Officer | LDK SOLAR,SAIWEI ROAD, HIGH-TECH ZONE, XINYU CITY F4 338000 |
Charlotte Xi Klein | officer: President, Global COO, CFO | 201 CALIFORNIA STREET, SUITE 1250, SAN FRANCISCO CA 94111 |
James Pekarsky | officer: Chief Financial Officer | 1349A OLIVE STREET, SAN CARLO CA 94070 |
Dennis Wu | director | SOLAR POWER INC, 2240 DOUGLAS BLVD, SUITE 200, ROSEVILLE CA 95661 |
Ldk Solar Co., Ltd. | 10 percent owner | HIGH-TECH INDUSTRIAL PARK, XINYU CITY, JIANGXI PROVINCE F4 338032 |
Jack K Lai | director | C/O LDK SOLAR USA, INC., 1290 OAKMEAD PARKWAY, SUITE 306, SUNNYVALE CA 94085 |
Peng Xiaofeng | director | #15, 35/F WEST TOWER, SHUN TAK CENTRE, 200 CONNAUGHT ROAD, CENTRAL K3 00000 |
Joseph Bedewi | officer: Chief Financial Officer | SOLAR POWER INC, 1115 ORLANDO AVE, ROSEVILLE CA 95661 |
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