Is Mitie's (LON:MTO) share price being weighed down by a weak balance sheet?

Is Mitie's (LON:MTO) share price being weighed down by a weak balance sheet?

Article image

Screening out weak balance sheets is one of the most effective ways of reducing risk in your portfolio.

One simple way to do this is to apply Stockopedia's take on the Altman Z-Score, a checklist that was found to be up to 80-90% accurate in predicting bankruptcy one year before the event in the 31 years up until 1999 in the original study. We can see it in action by applying it to facilities management group Mitie (LON:MTO), which is one of those companies that is often preceded by the adjective "troubled".

Outsourcing is a tough business. Carillion went bust in 2018, a couple of years after Serco lost 75% of its value. Mitie has been a similar story, with its share price having more or less halved over the past five years in what has proven to be a relentless downward drift.

So, how does it fare against Altman’s influential checklist?

What does the Altman Z-Score flag up about Mitie (LON:MTO)?

Unfortunately, Mitie fails Altman’s test, with a worryingly low Z-Score of -0.24. This is well below the distress threshold of 1.8...

Mitie's low Z-Score doesn't mean that it is definitely heading for financial distress, but it does mean this fate is more of a risk for Mitie than it is for most. Given the fortunes of its peers, and the fact that nearly 6% of its stock remains loaned out to short parties, there appear to be more risks to the downside than the upside.

Here's exactly how Mitie fails the Z-Score:

5c8f8993071dfimage.png

Next Steps

To find more stocks like MITIE, you'll need to equip yourself with professional-grade data and screening tools to pinpoint the highest quality companies in the market. This kind of information has traditionally been closely guarded by professional fund managers. But our team of financial analysts have carefully constructed this screen - which gives you everything you need.

In less than a minute, you can be exploring a list of stocks with the very strongest financial ratios in the market. You'll be joining us on a journey towards owning the very best quality stocks possible. So what are you waiting for? Come and get started for free.


About us

Stockopedia helps individual investors make confident, profitable choices in the stock market. Our StockRank and factor investing toolbox unlocks institutional-quality insights into thousands of global stocks. Voted “Best Investment Research Tools” and “Best Research Service” at the 2021 UK Investor Magazine awards.

MITIE's StockRank™

Super StockAdventurous

MITIE's StockRank™

With a StockRank of 85, MITIE is more attractive than 85% of the 7,586 stocks we cover in Europe, according to our proprietary ranking system.

See the full StockReport

Absolutely Perfect

"Trialed multiple other platforms - this is by far my favourite. Other platforms do not even have half the stuff that you can find on Stockopedia. Love it!"

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.