BOSTON (TheStreet) -- Companies that trade for less than $5 a share typically are viewed as speculative and at risk of going broke. That's not always the case. Fortunately for investors, there is a reliable measure to help predict a company's bankruptcy risk.
The
, a formula developed by New York University professor Edward Altman in 1968, measures companies' financial health to predict which may enter bankruptcy within two years. The gauge was 80% to 90% accurate on samples of distressed firms one year prior to bankruptcy by examining working capital, retained earnings and other measures, according to Altman's study.
Altman Z-scores carry three classifications. Companies with an Altman Z-score of at least 3 are considered "safe," while those with 1.8 or less are "distressed." Those in between are in a gray zone. Some stocks trading under $5 even have a negative score.
TheStreet
ranked companies on the
New York Stock Exchange
, NYSE Amex and
Nasdaq
trading at less than $5 with a minimum $5 million market value and the highest Altman Z-score. Each company's quick ratio is given, helping to measure the ability to meet short-term obligations.
5.
American DG Energy
(ADGE)
Company Profile
: American DG Energy distributes, owns and operates clean, on-site energy systems that produce electricity, hot water, heat and cooling.
Altman Z-score
: 54.8
Closing Price
: $3.15 (Sept. 15)
Financial Metrics
: American DG Energy has a price-to-book ratio of 11.8, which suggests the stock may be overvalued based on book value. American DG Energy's quick ratio, which measures the ability to meet short-term obligations with its most liquid assets, is 1.4, indicating the energy-systems company should be able to meet its current liabilities.
Analyst Consensus
: There are currently no research firms with coverage of American DG Energy.
4.
BioTime
(BTIM)
Company Profile
: BioTime is engaged in the business of developing blood plasma volume expanders and related products and stem-cell-related products, and technology for diagnostic, therapeutic and research use.
Altman Z-score
: 55.66
Closing Price
: $4.65 (Sept. 15)
Financial Metrics
: BioTime has a price-to-book ratio of 7.22, which suggests the stock may be overvalued based on book value. BioTime's quick ratio, which measures the ability to meet short-term obligations with its most liquid assets, is a whopping 13, indicating the company would have no trouble meeting its current liabilities.
Analyst Consensus
: No analyst has coverage on BioTime.
3.
Uranerz Energy
(URZ)
Company Profile
: Uranerz Energy is an exploration-stage company engaged in the acquisition, exploration and development of properties in the uranium industry.
Altman Z-score
: 66.26
Closing Price
: $1.31 (Sept. 15)
Financial Metrics
: Uranerz Energy has a price-to-book ratio of 3.33, which suggests the stock may be slightly overvalued based on book value. Uranerz's quick ratio, which measures the ability to meet short-term obligations with its most liquid assets, is 27, a sign the uranium company should easily be able to meet its current liabilities.
Analyst Consensus
: Two analysts cover Uranerz Energy and both recommend that investors buy shares. That's down from three "buy" ratings a month ago.
2.
Rexahn Pharmaceuticals
(RNN)
Company Profile
: Rexahn Pharmaceuticals is a clinical-stage biopharmaceutical company developing and seeking to deliver novel cures for cancer and disorders of the central nervous system to patients worldwide.
Altman Z-score
: 69
Closing Price
: $1.24 (Sept. 15)
Financial Metrics
: Rexahn Pharmaceuticals has a price-to-book ratio of 6.25, which suggests the stock may be overvalued based on book value. Rexahn's quick ratio, which measures the ability to meet short-term obligations with its most liquid assets, is 11, indicating the biopharmaceutical company would be able to meet its current liabilities.
Analyst Consensus
: No research firm has coverage on Rexahn, although one had a "buy" rating on the stock about three months ago.
1.
Pure Bioscience
(PURE)
Company Profile
: Pure Bioscience develops bioscience products, including antimicrobials.
Altman Z-score
: 69.8
Closing Price
: $2.05 (Sept. 15)
Financial Metrics
: Pure Bioscience has a price-to-book ratio of 11.9, which suggests the stock may be overvalued based on book value. Pure's quick ratio, which measures the ability to meet short-term obligations with its most liquid assets, is 4.9, indicating the company should be able to meet its current liabilities.
Analyst Consensus
: Only one firm follows Pure Bioscience, recommending that investors buy shares of the bioscience products maker
-- Written by Robert Holmes in Boston
.
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