Two financial risks weighing down Dixons Carphone's share price

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 Consumer Cyclicals group Dixons Carphone (LON:DC.).

The Altman Z-Score doesn't like Dixons Carphone

Unfortunately, Dixons Carphone fails Altman’s test, with a worryingly low Z-Score of -0.082. This is well below the distress threshold of 1.8 and suggests that the group is heading for financial distress within the next two years.

Here's exactly how Dixons Carphone fails the Z-Score:

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