This effort starts by identifying improving Altman Z Scores. Further, it includes other metrics to help identify companies before the market recognizes with a higher stock price.
Z score penetrates both the Balance Sheet and Income Statement. Its function is predicting financial distress.
Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E
More academic details on the Altman Z score
A = Working Capital/Total Assets; (measure of the net liquid assets relative to the total capitalization. consistent operating losses reduce current assets in relation to total assets)
B = Retained Earnings/Total Assets; (high Retained Earnings to total assets indicates assets financed through retention of profits relative to debt )
C = Earnings Before Interest & Tax/Total Assets; (measures the earnings power of the assets independent of tax or leverage.)
D = Market Value of Equity/Total Liabilities; (measures the stock's price times share outstanding (market value) to total liabilities (short and long term). A growing total liabilities relative to market size indicates potential insolvency)
E = Sales/Total Assets; (measures the sales generating capacity relative to total assets)
Score below 1.8 indicates an increased probability for bankruptcy, above 3.0 bankruptcy is remote.
I've included other metrics to avoid stocks temporally inflating or reducing Z score values. Issuing more shares enhances Z score value by increasing the cash balance. Dividend distributions reduce Z score values via reduced retained earnings and cash. Further I looked at financial health, institutional and insider ownership, shorts as a percentage of float, top line changes, stock price changes for mean reversion attributes, Sloan ratio to identify aggressive accrual accounting, historical and relative valuation.
Several ideas were uncovered. Today I will introduce Build-A-Bear Workshop (BBW).
BBW is a specialty retailer of plush animals and related products. It provides a "make your own stuffed animal" interactive retail entertainment experience. "As of September 16, 2015, the company operated 400 stores worldwide, including company-owned stores in the United States, Canada, Denmark, Ireland, Puerto Rico, and the United Kingdom; and franchised stores in Africa, Asia, Australia, Europe, Mexico, and the Middle East. The company has strategic relationships with Disney, Hasbro, Sanrio, and Star Wars. Build-A-Bear Workshop, Inc. was founded in 1997 and is headquartered in St. Louis, Missouri". Yahoo.
Current Price 12/18/15 = $11.33
Market Cap: 185.65M , Enterprise Value: 149.34M
Shares Outstanding: 16.39M, Float: 11.86M , Float/Shares Outstanding= .76
Price/Sales: 0.49 , Price/Book= 2.04 , EV/Revenue= 0.38
Enterprise Value/EBITDA: 3.70
Off52WkHigh% = 103%, % Off 52 Wk Low% = 1%
Per share EV = 9.03, cash per share = 2.33, zero debt
Gross Profit per share = 11.01 , EBITDA per share = 2.33
CFFO per share = 1.70, FCF per share = .47
ROA = 8.15 , EV/GP = .83
Insider Ownership = 18%, Short % float 7.22%
52-Week Change: -40.87
Analysis of all 5 (A to E) Z score components from 2009 to TTM.
(Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E)