financial-health-scores

Financial Health Scores

Retrieve financial health scores including Altman Z-Score and Piotroski Score for public companies using Octagon MCP.

Prerequisites

Ensure Octagon MCP is configured in your AI agent (Cursor, Claude Desktop, Windsurf, etc.). See references/mcp-setup.md for installation instructions.

Query Format

Retrieve financial health scores for <TICKER>, including the Altman Z-Score and Piotroski Score.

MCP Call:

{
  "server": "octagon-mcp",
  "toolName": "octagon-agent",
  "arguments": {
    "prompt": "Retrieve financial health scores for TSLA, including the Altman Z-Score and Piotroski Score"
  }
}

Output Format

The agent returns health scores with supporting metrics:

Altman Z-Score: 16.84 (calculated using working capital, total assets, retained earnings, EBIT, and market cap). A score above 3.0 indicates low bankruptcy risk.

Piotroski Score: 6 (out of a maximum 9). This score assesses profitability, leverage, liquidity, and operating efficiency.

Supporting Financial Metrics:

Metric	Value (USD)
Working Capital	36,928,000,000
Total Assets	137,806,000,000
Retained Earnings	39,003,000,000
EBIT	5,616,000,000
Market Cap	1,400,635,834,800
Total Liabilities	54,941,000,000
Revenue	94,827,000,000

Data Source: octagon-financials-agent

Altman Z-Score Interpretation

The Altman Z-Score predicts bankruptcy probability:

Z-Score Range	Interpretation
> 3.0	Safe Zone - Low bankruptcy risk
1.8 - 3.0	Grey Zone - Moderate risk, needs monitoring
< 1.8	Distress Zone - High bankruptcy risk

Z-Score Formula

Z = 1.2(WC/TA) + 1.4(RE/TA) + 3.3(EBIT/TA) + 0.6(MC/TL) + 1.0(Rev/TA)

Where:

• WC = Working Capital
• TA = Total Assets
• RE = Retained Earnings
• EBIT = Earnings Before Interest and Taxes
• MC = Market Cap
• TL = Total Liabilities
• Rev = Revenue

Piotroski Score Interpretation

The Piotroski F-Score (0-9) assesses financial strength:

Score Range	Interpretation
8-9	Strong - High quality value stock
5-7	Moderate - Average financial health
0-4	Weak - Poor financial health

Piotroski Components (9 criteria)

Profitability (4 points):

1. Positive Net Income
2. Positive Operating Cash Flow
3. Return on Assets improvement
4. OCF > Net Income (accruals quality)

Leverage/Liquidity (3 points): 5. Lower long-term debt ratio 6. Higher current ratio 7. No new share issuance

Operating Efficiency (2 points): 8. Higher gross margin 9. Higher asset turnover

Analysis Tips

Combined Assessment

Use both scores together:

• High Z-Score + High Piotroski = Financially healthy
• High Z-Score + Low Piotroski = Watch operating trends
• Low Z-Score + High Piotroski = Leverage concern
• Low Z-Score + Low Piotroski = Avoid or deep value

Value Investing Application

Piotroski Score designed for:

• Screening high book-to-market stocks
• Identifying quality within value
• Avoiding value traps

Credit Analysis

Z-Score useful for:

• Bond investment decisions
• Supplier credit assessment
• Counterparty risk evaluation

Sector Considerations

Scores work best for:

• Manufacturing companies (Z-Score original use)
• Mature businesses with stable operations
• Less reliable for: financials, early-stage, asset-light

Follow-up Queries

Based on results, suggest deeper analysis:

• "What factors contributed to [COMPANY]'s Piotroski Score versus industry peers?"
• "How does [COMPANY]'s Altman Z-Score compare to its historical averages?"
• "Break down the individual components of [COMPANY]'s Piotroski Score"
• "Compare [COMPANY]'s financial health scores to [PEER1] and [PEER2]"