Hot Features
Premium
Register for real-time alerts, custom portfolio, and market movers
I’ll use Piotroski’s nine factors aimed at a detecting a trend in financial distress risk to initiate a discussion of SpaceandPeople’s vulnerability to running into serious problems. After all, this share has fallen 86% in four years, which might indicate that Mr Market thinks it is likely to go bust. Below there is an analysis based on the annual accounts to December 2017 and a more up to date one based on the half-year report ending 30th June 2018.
The nine factors:
- Did it produce a net income before extraordinary/exceptional items?
Annual: Yes, profits of £0.9m. A Piotroski point for the annual analysis
Half-year: No, a loss of £0.08m. No Piotroski point for the half-year analysis.
- Cash flow from operations?
Annual: Yes, cash flow from operations of £1.7m. Second point gained.
Half-year: Yes, cash flow from operations of £0.17m. First half-year analysis Piotroski point.
- A positive change in return on assets employed in the business from the previous year?
Annual: A rise in ROA (it made a loss in 2016). Third Piotroski point.
Half-year: No, the previous half-year was profitable whereas 2018 was loss-making. No Piotroski point.
- Cash flow is greater than profit
Annual: Yes, so another point is scored.
Half-year: Yes, cash flow was positive, but a loss was made. Second Piotroski point.
- Has the firm’s long-term debt reduced relative to its average total assets?
Annual: In 2016 the company owed bank debt, but by the end of 2017 this was all repaid. Fifth Piotroski point.
Half-year: In the first half of 2017 SAL had £1m bank debt outstanding, but this had been repaid by June 2018. A third Piotroski point scored.
- Has the firm’s current ratio (current assets divided by current liabilities) improved over the past year?
Annual: 2017: £6.028m/£5.074m = 1.19; 2016: £4.934m/£5.120m = 0.96. Sixth Piotroski point.
Half-year: 2018: £3.692m/£2.984m = 1.24; 2017: £4.848m/£3.949m = 1.23. Fourth Piotroski point for half-year analysis.
- Has the firm avoided raising fresh equity capital (e.g. rights issue or placing) in the last year?
Annual: Yes, so a seventh point is gained.
Half-year: Yes, so a
………………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
