Peyto Bankruptcy Probability and Financials
So much talk about Peyto keeling over/bankruptcy, I decided to give it a crack myself.
I tried Altman Z-Score for 2018.
Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E
Where:
A = working capital / total assets
B = retained earnings / total assets
C = earnings before interest and tax / total assets
D = market cap / total liabilities
E = sales / total assets
Total Assets 3688.85
Total Current Assets 135.23
Total Current Liabilities 243.88
Working Capital = Current Assets-Current Liabilities
Retained earnings -29.860
EBITDA 364.47
Market cap 672.69
Total Liabilities 2,008.39
Sales/Revenue 475.52
For 2018 the Z-Score came out to less than 1. They say below 1.8 company is headed for bankrupcy very likely.
I think this formula is flawed for Peyto because by this they should have already gone under. The formula doesn't consider dividends or the fact they can be cut or eliminated.
So what it does say maybe is if Pey kept paying out the same dividend as start of 2018, they pretty much would be on the road to bankrupcy. D is also sketchy becuase its the market cap, and as we know this is at multi year lows.
A few interesting things I learned though.
Pey had -28 million "retained earnings" in 2018. They gave more dividednds than they could afford? Where did the 28 million come from then?
They have 560 million deferred tax liabilities - the heck is that all about?
They have 51 million interest expense. Their EBITDA is 364 million - prety much 7 times that. On that most basic level I don't see them in any danger of defaulting.
Would appreciate if anyone has any other insights related to defaults or errors in my math here.