What is Hospira Probability of Financial Distress (%)?
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, Hospira'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.
Competitive Comparison of Hospira's Probability of Financial Distress (%)
For the Drug Manufacturers - Specialty & Generic subindustry, Hospira'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.
Hospira's Probability of Financial Distress (%) Distribution in the Drug Manufacturers Industry
For the Drug Manufacturers industry and Healthcare sector, Hospira's Probability of Financial Distress (%) distribution charts can be found below:
* The bar in red indicates where Hospira's Probability of Financial Distress (%) falls into.
Hospira Probability of Financial Distress (%) Calculation
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
*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
3. CASHMTA = Cash to Market Total Assets
For non-financial companies, CASHMTA is measured as:
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
8. PRICE
PRICE is measured as the log of the stock price, capped at log(15).
Hospira (FRA:HOS) Business Description
Traded in Other Exchanges
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Hospira Inc was incorporated in Delaware on September 16, 2003. The Company is a provider of injectable drugs and infusion technologies, and is also engaged in developing, manufacturing, marketing and distribution. Its portfolio includes generic acute-care and oncology injectables, biosimilars, and integrated infusion therapy and medication management products. Its portfolio of products is used by hospitals and alternate site providers, such as clinics, home healthcare providers and long-term care facilities. The Company's business segments are Specialty Injectable Pharmaceuticals, Medication Management and Other Pharmaceuticals. Specialty Injectable Pharmaceuticals consists of generic injectable pharmaceuticals products. Generic injectable pharmaceuticals provide customers with a lower-cost alternative to branded products when associated patent protection expires, when patents are declared invalid, or when the generic products do not infringe the patents of others. Our generic injectable pharmaceuticals are sold in therapeutic areas including analgesia, anesthesia, anti-infectives, cardiovascular, oncology, and other. Medication Management offer the Hospira MedNet safety software system, which is designed for hospitals to customize intravenous drug dosage limits and track drug delivery to prevent medication errors. The wireless network version of the Hospira MedNet system establishes real-time send-and-receive capability and can interface with select hospital and pharmacy information systems. Other Pharmaceuticals primarily consists of large volume I.V. solutions, nutritionals and contract manufacturing services. We offer infusion therapy solutions and related supplies that include I.V. solutions for general use, I.V. nutrition products, and solutions for washing and cleansing of wounds or surgical sites. The Company's primary customers include hospitals, wholesalers, integrated delivery networks and alternate site facilities. Its competitors include Baxter International Inc.; Becton, Dickinson and Company; Fresenius Kabi AG; Mallinckrodt plc; Mylan Inc; Par Pharmaceuticals Companies, Inc.; Pfizer Inc.; Sandoz; Sanofi S.A. and Teva Pharmaceuticals, Aspen Medical; Fresenius Kabi; Pfizer; Sandoz and a number of smaller competitors and the originator companies. The Company's operations and business activities are subject to extensive legal and regulatory requirements that are enforced by numerous governmental agencies in the countries in which it do business.
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