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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 -1.90.
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 * 1.8591||+||0.528 * 1.0945||+||0.404 * 1.3655||+||0.892 * 0.885||+||0.115 * 0.8739|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.5537||+||4.679 * -0.1036||-||0.327 * 2.7292|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $51 Mil.|
Revenue was 230.918 + 337.615 + 384.258 + 332.918 = $1,286 Mil.
Gross Profit was -16.195 + 111.182 + 22.715 + 15.151 = $133 Mil.
Total Current Assets was $428 Mil.
Total Assets was $1,278 Mil.
Property, Plant and Equipment(Net PPE) was $496 Mil.
Depreciation, Depletion and Amortization(DDA) was $19 Mil.
Selling, General & Admin. Expense(SGA) was $66 Mil.
Total Current Liabilities was $238 Mil.
Long-Term Debt was $266 Mil.
Net Income was -38.107 + 69.391 + 4.572 + 11.007 = $47 Mil.
Non Operating Income was 0.272 + 5.294 + 1.183 + 0.768 = $8 Mil.
Cash Flow from Operations was 164.022 + -38.826 + 47.181 + -0.647 = $172 Mil.
|Accounts Receivable was $31 Mil.
Revenue was 219.04 + 390.591 + 458.444 + 384.735 = $1,453 Mil.
Gross Profit was 11.564 + 44.708 + 57.849 + 50.181 = $164 Mil.
Total Current Assets was $291 Mil.
Total Assets was $755 Mil.
Property, Plant and Equipment(Net PPE) was $312 Mil.
Depreciation, Depletion and Amortization(DDA) was $10 Mil.
Selling, General & Admin. Expense(SGA) was $48 Mil.
Total Current Liabilities was $76 Mil.
Long-Term Debt was $33 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)|
|=||(51.025 / 1285.709)||/||(31.014 / 1452.81)|
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)|
|=||(111.182 / 1452.81)||/||(-16.195 / 1285.709)|
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 - (427.659 + 496.355) / 1277.94)||/||(1 - (290.576 + 311.584) / 755.368)|
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))|
|=||(10.177 / (10.177 + 311.584))||/||(18.639 / (18.639 + 496.355))|
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)|
|=||(65.829 / 1285.709)||/||(47.875 / 1452.81)|
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)|
|=||((265.743 + 237.865) / 1277.94)||/||((33.179 + 75.89) / 755.368)|
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|
|=||(46.863 - 7.517||-||171.73)||/||1277.94|
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 -2.75 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