What is HP 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, HP's Probability of Financial Distress (%) is 0.16%.
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 HP's Probability of Financial Distress (%)
For the Computer Hardware subindustry, HP'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.
HP's Probability of Financial Distress (%) Distribution in the Hardware Industry
For the Hardware industry and Technology sector, HP's Probability of Financial Distress (%) distribution charts can be found below:
* The bar in red indicates where HP's Probability of Financial Distress (%) falls into.
HP 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 |
| = | -6.45 |
The Probability of Financial Distress (%) (PFD) was then obtianed by:
| PFD | = | 1 | / | (1 + e^(-LPFD)) | * | 100% |
| = | 0.16% |
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).
HP (HPQ) Business Description
Traded in Other Exchanges
Address
1501 Page Mill Road, Palo Alto, CA, USA, 94304
HP (formerly Hewlett-Packard) is a behemoth in the PC and printing markets. It has focused on these markets since it exited IT infrastructure in 2015 with the split from Hewlett Packard Enterprise. HP focuses on the commercial market, but maintains sales of consumer devices and printers. The firm has a broad and global customer base, with only one third of sales coming from the U.S. It completely outsources manufacturing and relies heavily on channel partners for its sales and marketing.
Executives
| Enrique Lores |
officer: President, PSS |
3000 HANOVER STREET, PALO ALTO CA 94304 |
| Alex Cho |
officer: President, Personal Systems |
HP, 1501 PAGE MILL ROAD, PALO ALTO CA 94304 |
| David W Meline |
director |
3M COMPANY, 3M OFFICE OF GENERAL COUNSEL, ST PAUL MN 55144-1000 |
| Berkshire Hathaway Inc |
10 percent owner |
3555 FARNAM STREET, OMAHA NE 68131 |
| Marie Myers |
officer: Global Controller, HFS & PAO |
3000 HANOVER STREET, PALO ALTO CA 94304 |
| Subra Suresh |
director |
HP, 1501 PAGE MILL RD BLDG 5, PALO ALTO CA 94036 |
| David P. Mcquarrie |
officer: Chief Commercial Officer |
C/O HP INC., 1501 PAGE MILL RD, PALO ALTO CA 94304 |
| Shumeet Banerji |
director |
C/O HEWLETT-PACKARD COMPANY, 3000 HANOVER STREET, PALO ALTO CA 94304 |
| Jonathan P Faust |
officer: Global Controller |
C/O HP INC, 1501 PAGE MILL ROAD, PALO ALTO CA 94304 |
| Tuan Tran |
officer: Pres Imaging Prtng & Solutions |
1501 PAGE MILL ROAD, PALO ALTO CA 94304 |
| Julie M Jacobs |
officer: Chief Legal Officer and GC |
22000 AOL WAY, DULLES VA 20166 |
| Kristen M Ludgate |
officer: Chief People Officer |
3M COMPANY OFFICE OF GENERAL COUNSEL, 3M CENTER, ST. PAUL MN 55144-1000 |
| Rucker Kim K.w. |
director |
KRAFT FOODS GROUP, INC., THREE LAKES DRIVE, NORTHFIELD IL 60093 |
| Richard L Clemmer |
director |
P O BOX 34552, LAS VEGAS NV 89129 |
| Judith A Miscik |
director |
300 RENAISSANCE CENTER, M/C: 482-C24-A68, DETROIT MI 48265 |
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