You've successfully subscribed to The Finbox Blog
Great! Next, complete checkout for full access to The Finbox Blog
Welcome back! You've successfully signed in.
Success! Your account is fully activated, you now have access to all content.
Stock Screen: Strong Altman Z-Score

Stock Screen: Strong Altman Z-Score

. 3 min read

Strong Altman Z-Scores

The goal of this screen is to find stocks with strong Altman Z-scores (credit risk indicator), positive cash flow, and increasing profits.

You can view the latest results here: Screen: Strong Altman Z-Scores

About the Altman Z-Score

The Altman Z-Score estimates the risk of bankruptcy within the next two years for a company. The methodology to calculate a Altman Z-Score is based on research published by Edward Altman in 1968. Edward Altman is a renowned Finance professor at NYU's Stern School of Business. A company's Z-Score is calculated using metrics derived from its Income Statement and Balance Sheet.

The formula can be summarized as follows:

Altman Z-Score =
       1.2  x  Working Capital / Total Assets
  (+)  1.4  x  Retained Earnings / Total Assets
  (+)  3.3  x  Earnings Before Interest and Taxes / Total Assets
  (+)  0.6  x  Market Capitalization / Total Liabilities
  (+)  1.0  x  Total Revenue / Total Assets
  • Working Capital / Total Assets measures the liquidity of the company's assets
    with respect to the size of the company
  • Retained Earnings / Total Assets is used as an indicator of past
    profitability, company age, and profit potential
  • Earnings Before Interest and Taxes / Total Assets measures the current
    profitability and asset efficiency of the company
  • Market Capitalization / Total Liabilities measures the amount of leverage
    based on the company's future profit potential and the value ascribed to its equity
    in the current economic environment
  • Total Revenue / Total Assets additional measure of current
    profitability and asset efficiency

Interpreting the Altman Z-Score

A company is considered to be in the Safe Zone if it scores greater than 2.99. If a company scores between 1.81 and 2.99, it's considered to be in the Gray Zone while a score below 1.81 is considered Distress Zone.


In this section, I'll summarize key filters used in the default Strong Altman Z-Scores screen:

  • Altman Z-Score > 3
  • Levered Free Cash Flow > $0 million
  • EBIT Growth > 0

Filter 1: Altman Z-Score makes it easy to find stocks that have strong Altman Z-Scores. You simply need to add the Altman Z-Score filter:

Altman Z-Score Filter

Filter 2: Levered Free Cash Flow

Levered Free Cash Flow (LFCF) represents a company's cash flows after interest payments on outstanding debt. These cash flows are typically retained by the company or distributed to shareholders in the form of dividends. I wanted to exclude companies with negative LFCF so I added the following criteria:

Levered Free Cash Flow Filter

Filter 3: EBIT Growth

EBIT is a common measure of profitability and stands of Earnings before Interest and Taxes. I wanted to exclude any companies with declining profitability:

EBIT Growth Filter

Downloading Results

Once the screen returns the relevant matches, you can either research the individual names further or create a portfolio based on the results.

To add any match to your Watchlist, just click the icon:

Add Watchlist

You can also Save the screen run again at a later time or Download all the matching results:

Download Save

Sources / Additional Reading