Three Stocks Popular on Stocktwits that Might be Zombie Companies

What’s a Zombie Company, you ask? The Federal Reserve defines it as “firms that are unable to generate enough profits to cover debt-servicing costs and that need to borrow to stay alive.” 

We’ve identified three companies popular on Stocktwits that might fit the bill. We say “might’ because there is no magic formula- just a bunch of clues. The clues we looked for are: 

Debt Service Coverage Ratio: 

The ratio of net operating income to total debt service cost. A number below 1 is terrible but less than 1.5 is flirting with disaster

A gearing ratio measuring the total debt relative to shareholder equity. We consider a company running over 100% as highly leveraged.

Sometimes companies can grow out of their debt but, the more debt you have, the faster you need to grow profit to pay it off.

Without further ado, here are three companies that the Stocktwits community is very interested in and may be zombies. 

Endeavor Group Holdings, Inc. operates as an entertainment, sports, and content company in the United States, the United Kingdom, and internationally. It operates in three segments: Owned Sports Properties, Events, Experiences & Rights, and Representation.

Endeavor has 4,121 Watchers on Stocktwits, a 14% Debt Service Coverage Ratio, 206% Debt-to-Equity, and has averaged 12% growth over the last three years. Over the last year, Endeavor grew revenues 63.25% and is guiding for 19.55% growth over the next year. If they can achieve that, they may be on a more solid financial footing. 

 

Party City Holdco Inc. is the leading party goods company by revenue in North America and, the company believes, the largest vertically integrated supplier of decorated party goods globally by revenue.

Party City has 12,144 Watchers on Stocktwits, a 56% Debt Service Coverage Ratio, 4,083% Debt-to-Equity, and has averaged -3.63% growth over the last three years. Over the last year, Party City grew revenues 16.84% and is guiding for 7.87% growth over the next year. The company is in a gigantic hole- they need a strong economy that stays open for business. 

MGM Resorts International is an S&P 500® global entertainment company with national and international locations featuring best-in-class hotels and casinos, state-of-the-art meetings and conference spaces, incredible live and theatrical entertainment experiences, and an extensive array of restaurant, nightlife and retail offerings..

MGM has 27,709 Watchers on Stocktwits, a 127% Debt Service Coverage Ratio, 237% Debt-to-Equity, and has averaged -2.87% growth over the last three years. Over the last year, MGM grew revenues 146% and is guiding for 38.83% growth over the next year. Like Party City, Covid really set back MGM and they have made a strong recovery upon reopening. Any more economic decline or lockdowns, however, may put them back in dangerous financial territory. 

Other companies that popped up on our list: CZR, RAD, LGF.A, RXT, COTY, CZR