What is CVS Health 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, CVS Health's Probability of Financial Distress (%) is 0.05%.
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 CVS Health's Probability of Financial Distress (%)
For the Healthcare Plans subindustry, CVS Health'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.
CVS Health's Probability of Financial Distress (%) Distribution in the Healthcare Plans Industry
For the Healthcare Plans industry and Healthcare sector, CVS Health's Probability of Financial Distress (%) distribution charts can be found below:
* The bar in red indicates where CVS Health's Probability of Financial Distress (%) falls into.
CVS Health 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 |
| = | -7.57 |
The Probability of Financial Distress (%) (PFD) was then obtianed by:
| PFD | = | 1 | / | (1 + e^(-LPFD)) | * | 100% |
| = | 0.05% |
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).
CVS Health (CVS Health) Business Description
Traded in Other Exchanges
Address
One CVS Drive, Woonsocket, RI, USA, 02895
CVS Health offers a diverse set of healthcare services. Its roots are in its retail pharmacy operations, where it operates over 9,000 stores primarily in the U.S. CVS is also the largest pharmacy benefit manager (acquired through Caremark), processing over 2 billion adjusted claims annually. It also operates a top-tier health insurer (acquired through Aetna) where it serves about 26 million medical members. The company's recent acquisition of Oak Street adds primary care services to the mix, which could have significant synergies with all its existing business lines.
Executives
| Edward J Ludwig |
director |
C/O BECTON DICKERSON & CO, 1 BECTON DR, FRANKLIN LAKES NJ 07417 |
| Michael F Mahoney |
director |
BOSTON SCIENTIFIC CORPORATION, 300 BOSTON SCIENTIFIC WAY, MARLBOROUGH MA 01752-1234 |
| Thomas F. Cowhey |
officer: SVP, Interim CFO |
310 SEVEN SPRINGS WAY, SUITE 500, BRENTWOOD TN 37027 |
| J Scott Kirby |
director |
233 S. WACKER DRIVE 11TH FL WHQLD, CHICAGO IL 60606 |
| Brian A Kane |
officer: EVP/President, Aetna |
500 W MAIN STREET, LOUISVILLE KY 40202 |
| James David Clark |
officer: SVP, Cont & Chief Acct Officer |
ONE CVS DRIVE, WOONSOCKET RI 02760 |
| Karen S Lynch |
officer: EVP & Pres, Aetna Bus Unit |
151 FARMINGTON AVENUE, RW61, HARTFORD CT 06156 |
| Samrat S. Khichi |
officer: EVP, CPO and General Counsel |
C/O CATALENT, INC., 14 SCHOOLHOUSE ROAD, SOMERSET NJ 08873 |
| Thomas M Moriarty |
officer: EVP & General Counsel |
100 PARSONS POND DRIVE, FRANKLIN LAKES NJ 07417 |
| Jeffrey R. Balser |
director |
3657 RICHLAND AVE., NASHVILLE TN 37205 |
| Alan Lotvin |
officer: EVP, Transformation |
55 NOD ROAD, AVON CT 06001 |
| Daniel P Finke |
officer: EVP/Pres, Health Care Benefits |
ONE CVS DRIVE, WOONSOCKET RI 02895 |
| Tilak Mandadi |
officer: EVP, Chief Technology Officer |
3600 LAS VEGAS BLVD. SOUTH, LAS VEGAS NV 89109 |
| Sreekanth K Chaguturu |
officer: EVP and Chief Medical Officer |
ONE CVS DRIVE, WOONSOCKET RI 02895 |
| Prem S Shah |
officer: EVP and Co-President of Retail |
ONE CVS DRIVE, WOONSOCKET RI 02895 |
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