For anyone interested in value stocks, I computed Z = 4.2 for JLMI, a small stock that I own.
The co. has a plant that produces acetone, which is used in making plastics.
The stock has fallen more than 50% in the last year, and now has a PSR of 0.13, p/e of 5, and a p/b of 0.85. They aren't heavily leveraged, with debt/equity of only 0.3. ROE and ROA are well above the chemical industry's average.
yahoo.marketguide.com
Those ratios are why I bought the stock.
They own one plant, which runs at full capacity, all the time. Pretty simple.
The risk is that they produce a single commodity product, and the market price of acetone has declined in the last year, depressing margins. I suppose that accounts for the stock price drop. The eps will decline, so that p/e of 5 won't last very long.
I wanted to know much risk I face, since the co. is looking at declining margins. I figured that since this an uncomplicated type of manufacturing co., maybe Altman's Z can be relied on.
I computed Z = 4.2 for 1998, down from 5.4 the year before. |
