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Altman Z-Score Screener: Find Financially Distressed Stocks
Mid-cap stocks classified into three bankruptcy-risk zones by the Altman Z-Score model. Filter to the Distress Zone (Z<1.81) to surface high-risk companies, or the Safe Zone (Z≥2.99) to find financially healthy businesses. Every row links to a full stock intelligence page.
How to Read the Altman Z-Score
The Altman Z-Score was developed by NYU finance professor Edward Altman in 1968 as a quantitative answer to a specific question: can a simple formula predict corporate bankruptcy two years in advance? After analyzing 66 manufacturing firms — half of which had gone bankrupt — Altman found that five financial ratios, combined with specific weights, correctly classified 94% of the bankrupt firms and 97% of the healthy ones. The formula has been widely used by credit analysts, value investors, and risk managers ever since.
The five ratios each capture a different dimension of financial health. Working capital to assets (X1) measures short-term liquidity — whether the company can meet its near-term obligations. Retained earnings to assets (X2) captures accumulated profitability over the company's life — a firm with long-standing retained earnings has a larger cushion. EBIT to assets (X3) measures how productively the company generates operating profit from its asset base. Market cap to total debt (X4) is the equity buffer above the liabilities — how much the company's equity value can decline before assets fall below debt. Revenue to assets (X5) is asset turnover — how much revenue each dollar of assets generates. The formula weights EBIT most heavily (3.3×), reflecting that operating profitability is the strongest single predictor of distress.
The Three Zones
Altman's research established three score ranges with meaningfully different bankruptcy rates. The Distress Zone (Z<1.81) is the red flag: companies here showed dramatically elevated bankruptcy rates in Altman's original dataset and subsequent validations. The Grey Zone (1.81–2.99) is genuinely uncertain — some companies here recover, others deteriorate further. This is the zone where deeper qualitative analysis matters most: is management addressing the weakness, or are conditions getting worse? The Safe Zone (Z≥2.99)indicates a financially stable company that is unlikely to face near-term distress, though it says nothing about whether the stock is attractively priced.
Limitations and Context
The original model was built on 1960s manufacturing firms, which limits its precision for modern asset-light businesses, financial companies, and early-stage growth firms. A profitable software company with negative retained earnings (from early losses) or a bank with inherently different balance-sheet ratios may score artificially low without being in real distress. Altman later developed the Z''-Score specifically for non-manufacturing firms, adjusting the thresholds to 1.23 (distress) and 2.90 (safe). This screener uses the original public-company formula as the most widely recognized version, but always pair the score with industry context and a look at the trend over multiple periods.
For a per-ticker calculation with a full breakdown of all five ratios, use our Altman Z-Score calculator, which shows each component's contribution and how the score has trended over recent periods.
Frequently asked questions
What Z-Score is considered safe?
A Z-Score of 2.99 or higher puts a company in the Safe Zone — Altman's original research found firms above this threshold had very low bankruptcy rates in the following two years. That said, the threshold was calibrated on 1960s manufacturing companies, so treat it as a directional signal rather than a bright line, especially for non-manufacturing businesses.
What does a very high Z-Score (above 5 or 6) mean?
A very high Z-Score, often seen in companies with large market caps relative to their debt (X4) or strong asset turnover (X5), simply means the model sees very low distress risk. It does not mean the stock is a good investment — valuation, growth trajectory, and competitive position are separate questions the Z-Score does not address.
Should I avoid all stocks in the Distress Zone?
Not necessarily. Distress-zone stocks carry elevated financial risk, but some deep-value investors specifically seek them out — the thesis is that if the company avoids bankruptcy, the stock can recover dramatically. This is a high-risk strategy that requires understanding whether the distress is cyclical (recoverable) or structural (permanent). Use the Z-Score as an entry-level risk filter, not a final verdict.
Why do some tech or growth companies have low Z-Scores?
The original Z-Score formula penalizes companies with negative retained earnings (X2) or low asset turnover (X5). Fast-growing tech companies often have negative retained earnings from early reinvestment years and hold most of their value in intangibles not captured on the balance sheet. Their low Z-Scores reflect the model's manufacturing-era assumptions, not necessarily genuine distress. The Z''-Score variant was developed to better handle non-manufacturing firms.
How does the Z-Score differ from the Piotroski F-Score?
They measure different things. The Altman Z-Score is a bankruptcy prediction model — it asks whether the company is likely to default on its obligations. The Piotroski F-Score is a quality/momentum signal — it asks whether the company's fundamentals are strong and improving across nine pass/fail tests. A high Piotroski score with a low Altman Z-Score would be unusual and worth investigating closely. Use them together for a fuller picture.
How do I get the full analysis for a stock in this screener?
Click the ticker symbol in the screener table to open the Basis Report stock intelligence page for that company. From there you can run a full DCF valuation, review earnings quality, check insider and analyst signals, and generate a complete research report. The Z-Score screener is the first-pass risk filter; the full report gives you the depth to make a decision.