The Altman Z-Score is a model designed to predict the likelihood of a company going bankrupt within the next two years. Created by American finance professor Edward Altman in 1968, the model is specifically designed for publicly traded manufacturing companies with assets greater than $1 million.
Good Sign:
Altman Z-score of 3.96 is strong.
PepsiCo has a Altman Z-Score of 3.41, indicating it is in Safe Zones. This implies the Altman Z-Score is strong.
The zones of discrimination were as such:
When Altman Z-Score <= 1.8, it is in Distress Zones.
When Altman Z-Score >= 3, it is in Safe Zones.
When Altman Z-Score is between 1.8 and 3, it is in Grey Zones.
The historical rank and industry rank for PepsiCo's Altman Z-Score or its related term are showing as below:
BUE:PEP'
s Altman Z-Score Range Over the Past 10 Years
Min: 3.62 Med: 3.93 Max: 4.31
Current: 3.96
During the past 13 years, PepsiCo's highest Altman Z-Score was 4.31. The lowest was 3.62. And the median was 3.93.
PepsiCo Altman Z-Score Historical Data
The historical data trend for PepsiCo's Altman Z-Score can be seen below:
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
Competitive Comparison of PepsiCo's Altman Z-Score
For the Beverages - Non-Alcoholic subindustry, PepsiCo's Altman Z-Score, along with its competitors' market caps and Altman Z-Score 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.
PepsiCo's Altman Z-Score Distribution in the Beverages - Non-Alcoholic Industry
For the Beverages - Non-Alcoholic industry and Consumer Defensive sector, PepsiCo's Altman Z-Score distribution charts can be found below:
* The bar in red indicates where PepsiCo's Altman Z-Score falls into.
PepsiCo Altman Z-Score Calculation
Altman Z-Score model is an accurate forecaster of failure up to two years prior to distress. It can be considered the assessment of the distress of industrial corporations.
PepsiCo's Altman Z-Score for today is calculated with this formula:
Z
=
1.2
*
X1
+
1.4
*
X2
+
3.3
*
X3
+
0.6
*
X4
+
1.0
*
X5
=
1.2
*
-0.0423
+
1.4
*
0.703
+
3.3
*
0.0628
+
0.6
*
3.0143
+
1.0
*
0.4627
=
3.41
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency. GuruFocus does not calculate Altman Z-Score when X4 or X5 value is 0.
Trailing Twelve Months (TTM) ended in Mar. 2024: Total Assets was ARS84,283,701 Mil. Total Current Assets was ARS21,909,213 Mil. Total Current Liabilities was ARS25,472,145 Mil. Retained Earnings was ARS59,253,869 Mil. Pre-Tax Income was 2167752.537 + 553413 + 1356406.237 + 844319.993 = ARS4,921,892 Mil. Interest Expense was -170185.003 + -78337 + -70339.952 + -48240 = ARS-367,102 Mil. Revenue was 15375625.261 + 10053850.009 + 8207377.576 + 5357279.957 = ARS38,994,133 Mil. Market Cap (Today) was ARS205,319,692 Mil. Total Liabilities was ARS68,116,126 Mil.
* Note that for stock reported semi-annually or annually, GuruFocus uses latest annual data as the TTM data.
Distress Zones - 1.81 < Grey Zones < 2.99 - Safe Zones
PepsiCo has a Altman Z-Score of 3.41 indicating it is in Safe Zones.
Study by Altman found that companies that are in Distress Zone have more than 80% of chances of bankruptcy in two years.
PepsiCo (BUE:PEP) Altman Z-Score Explanation
X1: The Working Capital/Total Assets (WC/TA) ratio is a measure of the net liquid assets of the firm relative to the total capitalization. Working capital is defined as the difference between current assets and current liabilities. Ordinarily, a firm experiencing consistent operating losses will have shrinking current assets in relation to total assets. Altman found this one proved to be the most valuable liquidity ratio comparing with the current ratio and the quick ratio. This is however the least significant of the five factors.
X2: Retained Earnings/Total Assets: the RE/TA ratio measures the leverage of a firm. Retained earnings is the account which reports the total amount of reinvested earnings and/or losses of a firm over its entire life. Those firms with high RE, relative to TA, have financed their assets through retention of profits and have not utilized as much debt.
X3, Earnings Before Interest and Taxes/Total Assets (EBIT/TA): This ratio is a measure of the true productivity of the firm's assets, independent of any tax or leverage factors. Since a firm's ultimate existence is based on the earning power of its assets, this ratio appears to be particularly appropriate for studies dealing with corporate failure. This ratio continually outperforms other profitability measures, including cash flow.
X4, Market Value of Equity/Book Value of Total Liabilities (MVE/TL): The measure shows how much the firm's assets can decline in value (measured by market value of equity plus debt) before the liabilities exceed the assets and the firm becomes insolvent.
X5, Revenue/Total Assets (S/TA): The capital-turnover ratio is a standard financial ratio illustrating the sales generating ability of the firm's assets.
Altman Z-Score does not apply to financial companies.
PepsiCo Altman Z-Score Related Terms
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PepsiCo is a global leader in snacks and beverages, owning well-known household brands including Pepsi, Mountain Dew, Gatorade, Lay's, Cheetos, and Doritos, among others. The company dominates the global savory snacks market and also ranks as the second-largest beverage provider in the world (behind Coca-Cola) with diversified exposure to carbonated soft drinks, or CSD, as well as water, sports, and energy offerings. Convenience foods account for approximately 55% of its total revenue, with beverages making up the rest. Pepsi owns the bulk of its manufacturing and distribution capacity in the United States and overseas. International markets make up 40% of total sales and one third of operating profits.
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