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:

Data Source: octagon-financials-agent

Altman Z-Score Interpretation

The Altman Z-Score predicts bankruptcy probability:

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:

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]"

Financial Health Scores Skill

Retrieve Altman Z-Score and Piotroski Score for financial health assessment of public companies using the Octagon MCP server.

Installation

npx skills add OctagonAI/skills --skill financial-health-scores

<details> <summary>bun</summary>

bunx skills add OctagonAI/skills --skill financial-health-scores

</details>

<details> <summary>pnpm</summary>

pnpm dlx skills add OctagonAI/skills --skill financial-health-scores

</details>

What This Skill Does

This skill retrieves financial health metrics:

• Altman Z-Score (bankruptcy prediction)
• Piotroski F-Score (financial strength)
• Score interpretation and thresholds
• Historical score trends

Example Usage

Retrieve Altman Z-Score and Piotroski Score for TSLA

---

Octagon MCP Setup

This skill requires the Octagon MCP server to be configured in your AI agent.

Get Your API Key

1. Sign up at Octagon 2. Navigate to API Keys from the left menu 3. Generate and save your API key

Configure Cursor

1. Open Cursor Settings → Features > MCP Servers 2. Click + Add New MCP Server 3. Enter:

• Name: octagon-mcp
• Type: command
• Command: env OCTAGON_API_KEY=<your-api-key> npx -y octagon-mcp

Windows: cmd /c "set OCTAGON_API_KEY=<your-api-key> && npx -y octagon-mcp"

Configure Claude Desktop

Add to claude_desktop_config.json:

{
  "mcpServers": {
    "octagon-mcp-server": {
      "command": "npx",
      "args": ["-y", "octagon-mcp@latest"],
      "env": {
        "OCTAGON_API_KEY": "YOUR_API_KEY_HERE"
      }
    }
  }
}

Documentation

• Octagon Docs
• Octagon MCP GitHub

Interpreting Financial Health Scores

Altman Z-Score

Overview

Developed by Edward Altman in 1968 to predict bankruptcy probability within 2 years.

Interpretation Guide

Formula Components

Z = 1.2×A + 1.4×B + 3.3×C + 0.6×D + 1.0×E

Limitations

• Designed for manufacturing companies
• Less reliable for financials, utilities
• Market cap component adds volatility
• May miss rapid deterioration

Piotroski F-Score

Overview

Developed by Joseph Piotroski in 2000 for value stock screening.

Interpretation Guide

Nine Criteria (1 point each)

Profitability (4 points):

Leverage & Liquidity (3 points):

Operating Efficiency (2 points):

Use Case

Best for:

• High book-to-market (value) stocks
• Screening within value universe
• Avoiding value traps

Combined Analysis

Matrix Approach

Investment Implications

Strong Health (Z>3, P>7):

• Low risk profile
• Quality company
• May command premium valuation

Mixed Signals:

• Dig deeper into specific weaknesses
• Understand trend direction
• Compare to industry norms

Weak Health (Z<2, P<5):

• High risk profile
• Potential value trap
• Only for distressed specialists

Follow-up Analysis

Break down the individual 9 components of TSLA's Piotroski Score

Track TSLA's Altman Z-Score over the last 5 years

Compare TSLA's financial health scores to F and GM

Octagon MCP Setup

Get Your Octagon API Key

1. Sign up for a free account at Octagon 2. After logging in, from left menu, navigate to API Keys 3. Generate a new API key 4. Save the key securely - you'll need it for configuration

Prerequisites

Before installing or running Octagon MCP, you need to have npx (which comes with Node.js and npm) installed on your system.

Mac (macOS)

1. Install Homebrew (if you don't have it):

   /bin/bash -c "$(curl -fsSL https://raw.githubusercontent.com/Homebrew/install/HEAD/install.sh)"

2. Install Node.js (includes npm and npx):

   brew install node

3. Verify installation:

   node -v
   npm -v
   npx -v

Windows

1. Download the Node.js installer:

• Go to https://nodejs.org/ and download the LTS version for Windows.

2. Run the installer and follow the prompts. This will install Node.js, npm, and npx. 3. Verify installation: Open Command Prompt and run:

   node -v
   npm -v
   npx -v

If you see version numbers for all three, you are ready to proceed.

Configure Cursor

1. Open Cursor Settings 2. Go to Features > MCP Servers 3. Click + Add New MCP Server 4. Enter:

• Name: octagon-mcp
• Type: command
• Command: env OCTAGON_API_KEY=<your-api-key> npx -y octagon-mcp

Replace <your-api-key> with your actual Octagon API key.

Windows users: Use this command format instead:

cmd /c "set OCTAGON_API_KEY=<your-api-key> && npx -y octagon-mcp"

After adding, refresh the MCP server list to see the new tools. The Composer Agent will automatically use Octagon MCP when appropriate. Access the Composer via Command+L (Mac), select "Agent" next to the submit button, and enter your query.

Configure Claude Desktop

1. Open Claude Desktop 2. Go to Settings > Developer > Edit Config 3. Add the following to your claude_desktop_config.json:

{
  "mcpServers": {
    "octagon-mcp-server": {
      "command": "npx",
      "args": ["-y", "octagon-mcp@latest"],
      "env": {
        "OCTAGON_API_KEY": "YOUR_API_KEY_HERE"
      }
    }
  }
}

4. Restart Claude for the changes to take effect

Configure Windsurf

Add this to your ./codeium/windsurf/model_config.json:

{
  "mcpServers": {
    "octagon-mcp-server": {
      "command": "npx",
      "args": ["-y", "octagon-mcp@latest"],
      "env": {
        "OCTAGON_API_KEY": "YOUR_API_KEY_HERE"
      }
    }
  }
}

Verify Setup

1. Refresh the MCP server list 2. The octagon-agent tool should appear in available tools 3. Test with a simple query:

   Retrieve the current stock price for AAPL

Available Tools

Troubleshooting

API Key Issues: Verify the key is correctly set in the command string with no extra spaces.

Connection Issues: Ensure you have internet connectivity and the Octagon API is accessible.

Rate Limiting: Reduce query frequency if encountering rate limit errors.

Documentation

Full documentation: https://docs.octagonagents.com