How to Spot a Zombie Stock Before It Dies

You could be holding a zombie stock. Discover key financial ratios that expose the walking dead of the stock market—and how to avoid them.
Investment-Strategy , Short-Selling

Are you holding stocks that look fine on the surface — but are actually zombie companies about to collapse? This article shows you how to quickly spot these dangerous investments using simple financial ratios like Net Debt to EBIT, Piotroski F-Score, and Free Cash Flow to Debt. You will learn how to check your portfolio and avoid disasters. With clear steps and a ready-made stock screen, this guide helps you protect and grow your wealth—before it is too late.

Estimated Reading Time: 7 minutes

 

 

How to Survive the 2025 Zombie Company Apocalypse

The Looming Zombie Company Crisis

Some companies are already dead — they just don’t know it yet. These are zombie companies — businesses that are drowning in debt and barely making enough money to pay interest, let alone the actual debt. They look alive, but they are slowly collapsing, and if you own them, your investment could disappear overnight.

The worst part?

There are more zombie companies today than ever before. Interest rates have gone up, borrowing is expensive, and weak businesses can’t survive. If you own the wrong stocks, you’re at risk. But there’s good news — you can protect your portfolio and even find better investments if you take action now. In this article, I’ll show you how to identify zombie companies, sell them before they collapse, and reinvest in strong businesses that will actually help you grow your wealth.

 

What Are Zombie Companies?

A zombie company is a business that cannot stand on its own. It does not generate enough profit to cover its debt payments, so it keeps borrowing more just to survive. This was easy when interest rates were low, but now, with borrowing costs high and may rise, these companies are running out of time.

The problem is that zombie companies often look like normal businesses. They are still making sales, hiring employees, and announcing big plans. But behind the scenes, they are burning through cash, losing money, and sinking deeper into debt. If you own shares in a zombie company, you could wake up one day to find the stock price has crashed — or worse, the company has gone bankrupt. You can’t afford to ignore this problem. You need to check your portfolio today.

 

 

How to Identify Zombie Companies in Your Portfolio

You don’t need to be a finance expert to spot zombie companies. You just need to know a few key numbers. These financial ratios will tell you whether a company is financially strong or on the verge of collapse:

  • Net Debt to EBIT – Shows how much debt a company has compared to its operating profits. High numbers = trouble.

  • Piotroski F-Score – A score below 5 means the company is financially weak.

  • Free Cash Flow (FCF) to Debt – If this is negative, the company is burning cash instead of generating it.

  • Debt-to-Equity Ratio – A high number means the company is overloaded with debt.

  • Altman Z-Score – A low score predicts bankruptcy.

 

I’ve put together a stock screen to help you find out if there are any zombie companies in your portfolio. If you own any of these stocks, it’s time to make some decisions.

 

Click here to see if there are any Zombies hiding in your portfolio NOW!

 

 

The Zombie Company Stock Screen

This is what the 2025 zombie company stock screen looks like:

  • All companies worldwide

  • Market value of more than $1 billion

  • Select the 50% of companies with the worst Net Debt to EBIT ratio

  • Piotroski F-Score of less than five

  • Financial statements updated recently - in the past six months

  • An External Finance ratio (Change in Assets - Cash from Operations) / Total Assets) greater than zero. This means a company was not able to finance their asset growth - from internally generated funds (cash from operations)

 

Choose your own ratios

Before we get to the list of companies.

Remember, this is just a list of the best zombie-finding ratios I came up with.

The stock screener has a LOT of other ratios you can use, for example:

 

You can find a full list and their description here: Glossary of ratios to find zombie companies.

 

Sorted by Leverage Ratio

Firstly, I sorted the screen from high to low by Leverage Ratio. The Leverage Ratio = Total debt / (Average Total Assets)

It is thus total debt to average total assets of the company over the past two years.

 

Here is the list:

Name Country Leverage Ratio
Uniti Group Inc. USA 1.14
Alvotech Luxembourg 1.10
FTAI Aviation Ltd. USA 0.98
Brookdale Senior Living Inc. USA 0.95
RH USA 0.89
Iron Mountain Incorporated USA 0.89
Somnigroup International Inc. USA 0.85
New Fortress Energy Inc. USA 0.81
Fuyo General Lease Co., Ltd. Japan 0.80
PNE AG Germany 0.76
Sunoco LP USA 0.75
CGN New Energy Holdings Co., Ltd. Hong Kong 0.75
Sonoco Products Company USA 0.75
Lionsgate Studios Corp. USA 0.74
Sonic Automotive, Inc. USA 0.73
Navitas Petroleum, Limited Partnership Israel 0.73
GATX Corporation USA 0.71
APA Group Australia 0.71
Metaplanet Inc. Japan 0.70
AutoNation, Inc. USA 0.70

 

 

Sorted by Net Debt to EBIT

Next, I sorted the list from high to low by Net Debt to EBIT.

Net Debt to EBIT is equal to (Long-term debt + Short term debt – Cash) / Earnings before interest and taxes (EBIT).

This ratio shows you how able a company is to pay interest and capital on its debt. The smaller the ratio (means the company has a low amount of debt compared to EBIT) the healthier the company and the other way around.

For example, the highest value below is 4265. This means that Net Debt equals 4265 times EBIT. With this level of EBIT this company cannot even make an interest payment of 1% or it will be loss making!

 

Here is the list:

Name Country Net Debt to EBIT Leverage Ratio
Posco Future M Co., Ltd. South Korea 4,265.20 0.51
SK Innovation Co., Ltd. South Korea 1,341.37 0.49
BBMG Corporation China 1,126.30 0.46
E-MART Inc. South Korea 268.74 0.37
ANI Pharmaceuticals, Inc. USA 213.22 0.57
Pilbara Minerals Limited Australia 212.59 0.15
argenx SE The Netherlands 187.17 0.01
Summerset Group Holdings Limited New Zealand 102.81 0.23
Brookdale Senior Living Inc. USA 96.64 0.95
thyssenkrupp nucera AG & Co. KGaA Germany 75.89 0.02
EDP Renováveis, S.A. Spain 75.37 0.31
Kakao Pay Corp. South Korea 58.29 0.02
Hines Global Income Trust, Inc. USA 51.72 0.54
Navitas Petroleum, Limited Partnership Israel 50.66 0.73
Nissan Motor Co., Ltd. Japan 42.80 0.45
East Buy Holding Limited China 41.97 0.01
VGP NV Belgium 41.91 0.45
Fuyo General Lease Co., Ltd. Japan 36.27 0.80
Samsung SDI Co., Ltd. South Korea 35.45 0.31
Fuji Oil Co., Ltd. Japan 34.32 0.45

 

 

Click here to see if there are any Zombies hiding in your portfolio NOW!

 

 

Sort by Free Cash Flow to Debt

To see if the company generated enough cash to pay interest or repay debt, I sorted the results from low to high by Free Cash Flow (FCF) to Total Debt.

This ratio gives you an idea of how high the company's total debt is compared to its free cash flow (Cash from operations minus Capital expenditure). The worse-rated company with a value of -355 had negative free cash flow, not good news if they have to service debt.

 

Here is the list:

Name Country FCF to Debt Net Debt to EBIT Leverage Ratio
NewAmsterdam Pharma Company N.V. The Netherlands -355.44 4.73 0.00
GitLab Inc. USA -192.34 7.33 0.00
Viking Therapeutics, Inc. USA -78.45 5.97 0.00
Belite Bio, Inc USA -54.66 3.50 0.00
MoonLake Immunotherapeutics Switzerland -41.38 3.11 0.01
Rainbow Robotics Co.,Ltd. South Korea -38.45 31.89 0.00
Galapagos NV Belgium -28.73 16.60 0.00
Edgewise Therapeutics, Inc. USA -23.29 2.93 0.01
De Grey Mining Limited Australia -17.92 22.52 0.01
Doosan Robotics Inc. South Korea -17.51 6.61 0.01
MAG Silver Corp. Canada -14.58 10.37 0.00
IDEAYA Biosciences, Inc. USA -13.12 2.01 0.02
Vaxcyte, Inc. USA -8.04 2.94 0.03
C3.ai, Inc. USA -8.01 2.27 0.00
Rigetti Computing, Inc. USA -7.01 2.68 0.04
Akero Therapeutics, Inc. USA -6.45 2.48 0.05
BioArctic AB (publ) Sweden -5.83 2.01 0.05
Spartan Resources Limited Australia -5.34 12.38 0.03
WeRide Inc. China -4.74 2.94 0.02
Revolution Medicines, Inc. USA -4.18 3.12 0.06

 



Sorted by Debt to Equity

To not leave out a classic debt ratio here we sorted the list from high to low using the Debt-to-Equity ratio. It equals Total Debt / Common Shareholders Equity.

As you can see the worst-rated company has debt equal to over 42 times its equity!

 

Here is the list:

Name Country Debt to Equity FCF to Debt Net Debt to EBIT Leverage Ratio
FTAI Aviation Ltd. USA 42.34 -0.11 6.02 0.98
Brookdale Senior Living Inc. USA 26.60 -0.03 96.64 0.95
Sacyr, S.A. Spain 8.68 0.00 5.71 0.50
Somnigroup International Inc. USA 7.99 0.13 7.07 0.85
Asiana Airlines, Inc. South Korea 7.47 0.11 19.59 0.51
The Chemours Company USA 7.12 -0.23 7.85 0.55
Ryman Hospitality Properties, Inc. USA 6.36 0.00 6.19 0.68
Fuyo General Lease Co., Ltd. Japan 6.11 0.00 36.27 0.80
APA Group Australia 5.17 0.02 13.20 0.71
Restaurant Brands International Inc. Canada 5.12 0.08 6.28 0.66
New Fortress Energy Inc. USA 5.06 -0.21 14.20 0.81
PNE AG Germany 4.56 -0.23 26.00 0.76
The Chugoku Electric Power Co., Inc. Japan 4.22 0.00 21.54 0.67
CGN New Energy Holdings Co., Ltd. Hong Kong 3.94 0.00 11.76 0.75
Brookfield Renewable Partners L.P. Canada 3.90 -0.07 29.43 0.42
Sonic Automotive, Inc. USA 3.89 0.03 7.91 0.73
Aeon Co., Ltd. Japan 3.57 0.00 6.74 0.26
AutoNation, Inc. USA 3.54 0.00 6.53 0.70
SK Inc. South Korea 3.51 -0.09 29.43 0.42
Kyushu Electric Power Company, Inc. Japan 3.48 0.00 21.53 0.59

 

 

Click here to see if there are any Zombies hiding in your portfolio NOW!

 

 

Are These Companies Doomed

You might be wondering: Can’t these companies turn things around? The answer in a lot of cases is probably not. Zombie companies have had years of easy money and still couldn’t become profitable. Now, their biggest problem is refinancing their debt.

Think of it this way: Imagine you took out a loan at 2% interest. Now, when it’s time to renew, the bank tells you the new rate is 7%. If you were barely making payments before, you’re in serious trouble now. This is exactly what’s happening to zombie companies. Many of them borrowed heavily when rates were low, and now their costs are exploding. 

They can’t afford it, and many won’t survive.

Governments won’t save them this time. In 2020, businesses got emergency loans and bailouts. But in 2025? Governments are more worried about tariffs and inflation than saving failing companies. If you’re waiting for a bailout, you’re betting on a miracle— and miracles don’t happen in investing.

 

What to Do Now

If you own zombie stocks, don’t panic — but don’t wait, either. Here’s what to do:

  1. Check your portfolio. Use the financial ratios we covered earlier to identify weak companies.

  2. Sell the worst companies. If they can’t survive without borrowing more money, get out before it’s too late.

  3. Reinvest in strong businesses. Look for companies that:

    • Have low debt – They don’t rely on borrowing to survive.

    • Generate free cash flow – They actually make money.

    • Are profitable – They don’t struggle to pay their bills.

 

To make this process easier, use a stock screener to filter out bad companies and find strong investments instead. If you’re not sure where to start, the Quant Investing screener helps you quickly find financially strong stocks with real growth potential.

 

How We Help You Win

At Quant Investing, we believe: You can beat the market. Most investors think stock picking is a gamble, but the truth is, with the right tools and strategies, you can consistently find winning investments.

Our stock screener was built by investors, for investors. It’s not just a tool we sell — it’s the same tool we use every day to manage our own investments. It’s designed to help you find financially strong companies and avoid the ones that are heading for disaster.

When you join Quant Investing, you’re not just buying a tool — you’re joining a community of smart investors who refuse to settle for average returns. You’re taking control of your financial future with a system that works.

 

Act Before It Is Too Late

Zombie companies are very unlikely to survive in today’s market. They’ve relied on cheap debt for too long, and now they’re running out of options. Many will go bankrupt, wiping out investors who don’t act in time.

Take these three steps now to protect yourself:

  1. Check your portfolio for zombie stocks using the financial ratios we covered.

  2. Sell the weakest companies before they collapse.

  3. Invest in strong, profitable businesses with low debt and high cash flow.

 

 

FREQUENTLY ASKED QUESTIONS

1. How do I know if I already own a zombie stock?

Start by checking five numbers:

  • Net Debt to EBIT – If this is high, the company may not earn enough to pay its debts.

  • Free Cash Flow to Debt – If this is negative, the business is burning cash.

  • Debt-to-Equity Ratio – If debt is much higher than equity, the company is unstable.

  • Piotroski F-Score – A score below 5 is a red flag.

  • Altman Z-Score – A low score points to bankruptcy risk.

If any of these look bad, it is time to dig deeper—or sell fast.

 

2. Why do zombie companies look healthy on the surface?

Because they often still:

  • Announce new products,

  • Hire staff,

  • And issue upbeat news.

But behind the scenes, they are drowning in debt. They borrow more money just to survive. If interest rates stay high, they will likely collapse. Their stock can crash fast.

 

3. What if I bought a company for its brand or hype — but it turns out to be a zombie?

Do not hold just because it feels hard to sell. It is better to take a small loss now than a huge one later. Check the numbers, not the story. If the company fails key financial tests, trust the data. You can always reinvest in a stronger company.

 

4. Can zombie companies recover if the economy improves?

Some might, but most will not. They already had years of easy money and still failed to become profitable. Now, with higher debt costs and tighter credit, it is even harder for them to survive. Do not bet your money on a turnaround that may never come.

 

5. What should I do with my money after I sell a zombie stock?

Reinvest in strong companies. Look for businesses that:

  • Have low or no debt,

  • Make free cash flow,

  • And show steady profits.

These firms can grow without needing to borrow more money. They are safer and more likely to make you wealthier over time.

 

6. Is there a quick way to spot risky companies before I invest?

Yes—use a stock screener. The Quant Investing screener lets you filter 22,000+ stocks by:

  • Debt ratios,

  • Cash flow,

  • Profitability,

  • And quality scores like Piotroski F-Score or Altman Z-Score.

You can avoid weak companies before they hurt your portfolio.

 

7. I feel overwhelmed. How can I keep investing simple and safe?

Follow a system. Do not try to guess which stock will win. Use proven rules:

  • Avoid high-debt companies.

  • Focus on firms that generate real cash.

  • Diversify—do not put all your money in one idea.

With the right tools and a calm plan, investing gets easier—and safer.

 

Click here to see if there are any Zombies hiding in your portfolio NOW!

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