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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, Shutterstock's Probability of Financial Distress (%) is 0.04%.
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 Internet Content & Information subindustry, Shutterstock'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 Interactive Media industry and Communication Services sector, Shutterstock's Probability of Financial Distress (%) distribution charts can be found below:
* The bar in red indicates where Shutterstock'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 |
= | -7.75 |
The Probability of Financial Distress (%) (PFD) was then obtianed by:
PFD | = | 1 | / | (1 + e^(-LPFD)) | * | 100% |
= | 0.04% |
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).
Shutterstock (NYSE:SSTK) 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 Shutterstock's Probability of Financial Distress (%) provided by GuruFocus.com. Please click on the following links to see related term pages.
Jonathan Oringer | director, 10 percent owner, officer: Chief Executive Officer | C/O SHUTTERSTOCK, INC., 350 FIFTH AVENUE, 21ST FLOOR, NEW YORK NY 10118 |
Steven Ciardiello | officer: Chief Accounting Officer | 269 HANCE ROAD, FAIR HAVEN NJ 07704 |
John Caine | officer: Global Head of eCommerce | 350 FIFTH AVE, 20TH FLOOR, NEW YORK NY 10118 |
Paul J. Hennessy | director | C/O SHUTTERSTOCK, INC., 350 FIFTH AVENUE, 21ST FLOOR, NEW YORK NY 10118 |
Deirdre Mary Bigley | director | 109 INWOOD AVENUE, MONTCLAIR NJ 07043 |
Jarrod Yahes | officer: Chief Financial Officer | 425 W. 53RD STREET, PH1, NEW YORK NY 10119 |
Peter Silvio | officer: Chief Technology Officer | C/O SHUTTERSTOCK, INC., 350 FIFTH AVENUE, 21ST FLOOR, NEW YORK NY 10118 |
Stan Pavlovsky | director, officer: Chief Executive Officer | 3316 LINCOLN AVE NE, RENTON WA 98056 |
Thomas R Evans | director | 11760 US HIGHWAY ONE, SUITE 200, NORTH PALM BEACH FL 33408 |
Alfonse L Upshaw | director | 350 FIFTH AVENUE, 21ST FL, NEW YORK NY 10118 |
Abraham Moshe Muchnick | officer: Chief Product Officer | C/O SHUTTERSTOCK, INC., 350 FIFTH AVENUE, 21ST FLOOR, NEW YORK NY 10118 |
Rachna Bhasin | director | 1855 GRIFFIN ROAD, B454, DANIA BEACH FL 33004 |
Martin Brodbeck | officer: Chief Technology Officer | 26 BLAIR ROAD, ARMONK NY 10504 |
Louis Weiss | officer: Chief Marketing Officer | C/O VITAMIN SHOPPE, 2101 91ST STREET, NORTH BERGEN NJ 07047 |
Jeffrey Kane Weiser | officer: Chief Marketing Officer | 314 S. GLENROY AVENUE, LOS ANGELES CA 90049 |
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