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The zones of discrimination for M-Score is as such:
An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.
During the past 7 years, the highest Beneish M-Score of Renewable Energy Group Inc was 0.44. The lowest was -2.98. And the median was -2.14.
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.
The M-Score Variables:
The M-score of Renewable Energy Group Inc for today is based on a combination of the following eight different indices:
|M||=||-4.84||+||0.92 * DSRI||+||0.528 * GMI||+||0.404 * AQI||+||0.892 * SGI||+||0.115 * DEPI|
|=||-4.84||+||0.92 * 1.456||+||0.528 * 0.8228||+||0.404 * 0.9367||+||0.892 * 1.0078||+||0.115 * 0.6203|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.4848||+||4.679 * -0.0511||-||0.327 * 1.0944|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $52 Mil.|
Revenue was 394.856 + 373.762 + 230.918 + 337.615 = $1,337 Mil.
Gross Profit was 4.405 + 15.907 + -16.195 + 111.182 = $115 Mil.
Total Current Assets was $255 Mil.
Total Assets was $1,172 Mil.
Property, Plant and Equipment(Net PPE) was $563 Mil.
Depreciation, Depletion and Amortization(DDA) was $24 Mil.
Selling, General & Admin. Expense(SGA) was $75 Mil.
Total Current Liabilities was $135 Mil.
Long-Term Debt was $270 Mil.
Net Income was -15.675 + -2.001 + -38.107 + 69.391 = $14 Mil.
Non Operating Income was 3.79 + 3.9 + 0.272 + 5.294 = $13 Mil.
Cash Flow from Operations was 48.774 + -113.739 + 164.022 + -38.826 = $60 Mil.
|Accounts Receivable was $35 Mil.
Revenue was 384.258 + 332.918 + 219.04 + 390.591 = $1,327 Mil.
Gross Profit was 22.715 + 15.151 + 11.564 + 44.708 = $94 Mil.
Total Current Assets was $253 Mil.
Total Assets was $1,056 Mil.
Property, Plant and Equipment(Net PPE) was $462 Mil.
Depreciation, Depletion and Amortization(DDA) was $12 Mil.
Selling, General & Admin. Expense(SGA) was $50 Mil.
Total Current Liabilities was $84 Mil.
Long-Term Debt was $249 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(51.977 / 1337.151)||/||(35.422 / 1326.807)|
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(15.907 / 1326.807)||/||(4.405 / 1337.151)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (255.105 + 563.072) / 1172.227)||/||(1 - (253.238 + 462.053) / 1055.684)|
4. SGI = Sales Growth Index
Ratio of sales in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
5. DEPI = Depreciation Index
Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
|DEPI||=||(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1))||/||(Depreciation_t / (Depreciaton_t + PPE_t))|
|=||(12.159 / (12.159 + 462.053))||/||(24.278 / (24.278 + 563.072))|
6. SGAI = Sales, General and Administrative expenses Index
The ratio of SGA expenses in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
|SGAI||=||(SGA_t / Sales_t)||/||(SGA_t-1 /Sales_t-1)|
|=||(75.222 / 1337.151)||/||(50.27 / 1326.807)|
7. LVGI = Leverage Index
The ratio of total debt to total assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase$sgai= in leverage
|LVGI||=||((LTD_t + CurrentLiabilities_t) / TotalAssets_t)||/||((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)|
|=||((270.046 + 134.66) / 1172.227)||/||((248.553 + 84.475) / 1055.684)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(13.608 - 13.256||-||60.231)||/||1172.227|
An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.
Renewable Energy Group Inc has a M-score of -2.57 suggests that the company will not be a manipulator.
Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations
Renewable Energy Group Inc Annual Data
Renewable Energy Group Inc Quarterly Data