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Two financial risks weighing down Dixons Carphone's share price

16th May by Jack Brumby

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.).

GET MORE DATA-DRIVEN INSIGHTS INTO 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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The problem areas for Dixons Carphone identified here can be explored in more depth on Stockopedia's research platform, which has been designed specifically with retail investors in mind. All the best investors have stringent due diligence processes that reduce the chances of them suffering big losses, so why not take a leaf out of their book?

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Dixons Carphone ( )

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