10 Companies Least Likely to Go Bankrupt

NEW YORK (TheStreet) -- The financial crisis stoked investor fears that bankruptcy was imminent for a number of companies, no matter how big or small. Luckily for investors, there is a way to examine certain financial metrics to see which companies are least likely to declare bankruptcy.

The Altman Z-score, a formula developed by New York University professor Edward Altman in 1968, measures several aspects of a company's financial health to forecast the probability of that company entering bankruptcy within two years. The formula was found to be approximately 80% to 90% accurate in predicting bankruptcy on samples of distressed firms one year prior to the event by examining working capital, retained earnings and other financial inputs, according to Altman's study.

Companies with an Altman Z-score of at least 3 are considered in the "safe" zone, while companies with a score of 1.2 or below are considered "distressed."

TheStreet ranks companies trading on the New York Stock Exchange, Nasdaq, or American Stock Exchange that have a minimum $10 million market cap with the highest Altman z-score and examines what the future holds for these investors.


10. Nordic American Tanker Shipping ( NAT) is an oil tanker transportation company whose shares climbed a 52-week higher in January before falling days later after the company announced a secondary offering. Shares fell to a 52-week low shortly after Nordic American Tanker announced a first-quarter dividend to 60 cents per share, up from 25 cents in the fourth quarter of 2009.

Altman Z-score: 61.04

Closing Price: $29.61 (June 21)

One-Year Total Return: -0.4%

Consensus: Fifteen analysts cover Nordic American Tanker shares; six recommend buying the stock and six suggest holding shares. Another three firms, including EVA Dimensions, say that investors should sell shares. On Monday, Jefferies issued a buy rating on the stock with a $39 price target, while Cantor Fitzgerald offered a hold rating and $28 price target on the company's stock.

Valuation: Nordic American Tanker shares are expensive on a price-to-earnings and price-to-sales ratio of 23.17 and 11.21, respectively. That compares to its peers' average P/E ratio of 16.23 and average P/S ratio of 2.27.

9. China Green Agriculture ( CGA) is a Chinese humic acid liquid compound fertilizer producer and distributor. The stock hit a 52-week low of $6.56 in June 2009 before rallying to a 52-week high of $18.70 in December 2009. The stock is down more than 27% in 2010. Last week, China Green Agriculture reaffirmed its full-year guidance, saying it expects earnings of 90 cents to 91 cents a share on revenue of $50.6 million to $51.2 million, which is in line with the Thomson Reuters average estimate.

Altman Z-score: 62.5

Closing Price: $10.49 (June 21)

One-Year Total Return: 46.7%

Consensus: Of the five analysts covering China Green Agriculture, two recommend that investors buy shares while three suggest holding the stock. Both Chardan capital and Roth Capital Partners have buy ratings on the stock, with price targets of $18 and $15.50, respectively.

Valuation: China Green Agriculture shares trade at a slight price-to-earnings and price-to-sales premium compared to the average of peers. However, the stock is cheap on a price-to-book basis with a ratio of 2.14, below the peer average of 2.37.

8. Rubicon Technology ( RBCN) is an advanced electronic materials provider trading at an all-time high. Earlier this month, Rubicon Tech announced a public offering of 2.63 million shares of common stock at $30 per share, with net proceeds to be used to expand its crystal growth and post crystal growth manufacturing facilities. Shares debuted on the Nasdaq after the company's initial public offering in November 2007.

Altman Z-score: 63.41

Closing Price: $31.82 (June 21)

One-Year Total Return: 183.6%

Consensus: Six analysts recommending buying shares of Rubicon Tech, while another 3 suggest holding the stock and another says investors should sell. On June 18, D.A. Davidson analysts issued a buy rating on the stock and a $40 price target, which implies 21% upside over the next 12 months.

Valuation: Rubicon Tech is above the peer average on a price-to-earnings, price-to-book and price-to-sales basis. On the other hand, Cree ( CREE) offers investors more attractive ratios.

7. Myriad Genetics ( MYGN) is a molecular diagnostic products maker trading at a 52-week low. The stock traded at a 52-week high of $37.72 in June 2009 shortly before the company disappointed investors with its fiscal fourth-quarter earnings results and full-year revenue forecast.

Altman Z-score: 65.59

Closing Price: $16.23 (June 21)

One-Year Total Return: -55.8%

Consensus: Myriad is widely covered by Wall Street firms, with 21 ratings on the stock. Of those, eight recommend that investors buy shares, 12 suggest holding shares, and one says that traders should sell the stock. The average of 10 price targets is $22.60, which is roughly 38% above where Myriad shares currently trade. Most recently, William Blair & Co. offered a market perform rating on June 18.

Valuation: Myriad has a price-to-earnings ratio of 12.44, well below its peers' average P/E ratio of 78.23. The stock is also attractive on a price-to-book and price-to-sales basis.

6. HeartWare International ( HTWR) is a maker of implantable heart pumps used to assist patients with congestive heart disease. Shares have pushed steadily higher since debuting in June 2008 and now sit at an all-time high. Last week, HeartWare received conditional approval from the Food and Drug Administration to begin enrollment in an Investigational Device Exemption (IDE) destination therapy clinical study for its Ventricular Assist System.

Altman Z-score: 65.92

Closing Price: $72.68 (June 21)

One-Year Total Return: 190.7%

Consensus: Five analysts suggest buying shares of HeartWare and another recommends holding. Canaccord Genuity has the highest price target on HeartWare at $74, which is only 2% above where shares currently trade. On the other hand, Piper Jaffray, which is neutral on the stock, has a price target of only $50.

Valuation: HeartWare has a price-to-book ratio of 7.8 and a price-to-sales ratio of 24.16, compared to the peer averages of 3.83 and 6.58, respectively.

5. Techne ( TECH), which owns Research and Diagnostic Systems, manufactures cytokines, enzyme substrates and inhibitors, and other biological products. The stock is trading just above its 52-week low, set earlier this month. Analysts expect Techne will report a fiscal year profit of $2.82 a share, which would be up from the previous full-year profit of $2.78 a share.

Altman Z-score: 75.16

Closing Price: $59.61 (June 21)

One-Year Total Return: -6%

Consensus: Six analysts cover Techne, with three recommending that investors buy shares and three rating the stock with a hold. Robert W. Baird has the highest price target on Techne shares at $71, which implies an 18% rise over the next 12 months.

Valuation: Techne's price-to-earnings ratio of 20.78 is slightly below the peer average, although the stock is expensive on a price-to-book and price-to-sales basis.

4. NVE ( NVEC) is an electronics components manufacturer, with products ranging from sensors to isolators to switches. Shares have recovered from a 52-week low of $35.51 set in November 2009, but are still below the 52-week high of $63.64 from September 2009.

Altman Z-score: 87.10

Closing Price: $47.24 (June 21)

One-Year Total Return: 6.6%

Consensus: Of the three Wall Street firms with coverage of NVE Corp., two recommend buying shares while one has a hold rating. Craig-Hallum Capital Group has a $65 price target, which equates to nearly 35% upside from current levels.

Valuation: NVE Corp. shares are above the peer average on a price-to-earnings, price-to-book and price-to-sales basis.

3. Prolor Biotech ( PBTH) is a biopharmaceuticals company specializing in therapeutic proteins. Shares have rallied sharply higher from 75 cents a year ago to an all-time high of $8.85 on June 14.

Altman Z-score: 118.33

Closing Price: $7.51 (June 21)

One-Year Total Return: 901.3%

Consensus: Of the two analysts covering Prolor Biotech, one has a buy rating and the other suggests holding shares. Ladenburg Thalmann analysts have a $9 price target, which suggests 15% upside to shares over the next 12 months. Roth Capital Partners has a $7 price target, which is below where shares currently trade.

Valuation: Prolor has a price-to-book ratio of 13.21, slightly above the peer average of 12.82.

2. Houston American Energy ( HUSA) is an oil and gas explorer and producer with assets mostly in Texas. Shares notched a 52-week high of $20.36 in April, having set a 52-week low of $1.69 exactly one year ago.

Altman Z-score: 490.17

Closing Price: $13.07 (June 21)

One-Year Total Return: 662.7%

Consensus: Global Hunter Securities is the only firm with coverage on Houston American Energy. It has a buy rating and $14 price target.

Valuation: Houston American Energy has a price-to-earnings ratio of 81.69, which is sharply above the peer average of 22.52. Similarly, Houston American Energy shares are above the peer average on a price-to-book and price-to-sales basis.

1. Williams Pipeline Partners ( WMZ) is a natural gas transportation and storage assets manager whose stock is trading at an all-time high. The company pays a quarterly dividend of 34 cents a share with an annualized yield of 4.11%.

Altman Z-score: 538.23

Closing Price: $32.54 (June 21)

One-Year Total Return: 101%

Consensus: Four analysts currently cover Williams Pipeline Partners. Raymond James rates the company with an outperform rating, while three other firms recommending holding shares. Morgan Stanley is the only firm with a price target ($33) on Williams Pipeline Partners' stock.

Valuation: Williams Pipeline Partners has a price-to-earnings ratio of 21.52 and a price-to-book ratio of 2.43, both above the peer average of 17.97 and 1.9, respectively. However, shares have a price-to-free-cash-flow ratio of 18.43, below the peer average of 21.77.

-- Written by Robert Holmes in Boston.

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