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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 8 years, the highest Beneish M-Score of Renewable Energy Group Inc was 0.43. The lowest was -3.29. And the median was -2.22.
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 * 1.3115||+||0.528 * 1.0363||+||0.404 * 0.4979||+||0.892 * 1.2412||+||0.115 * 0.8815|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9262||+||4.679 * -0.1214||-||0.327 * 1.3371|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $97 Mil.|
Revenue was 558.301 + 305.594 + 387.808 + 394.856 = $1,647 Mil.
Gross Profit was 24.862 + 25.108 + 105.659 + 4.405 = $160 Mil.
Total Current Assets was $374 Mil.
Total Assets was $1,153 Mil.
Property, Plant and Equipment(Net PPE) was $602 Mil.
Depreciation, Depletion and Amortization(DDA) was $29 Mil.
Selling, General & Admin. Expense(SGA) was $81 Mil.
Total Current Liabilities was $168 Mil.
Long-Term Debt was $349 Mil.
Net Income was 7.016 + 1.656 + -95.609 + -15.675 = $-103 Mil.
Non Operating Income was 12.167 + -0.073 + -1.773 + 3.79 = $14 Mil.
Cash Flow from Operations was -169.826 + 163.286 + -18.897 + 48.774 = $23 Mil.
|Accounts Receivable was $60 Mil.
Revenue was 373.762 + 230.918 + 337.615 + 384.258 = $1,327 Mil.
Gross Profit was 15.907 + -16.195 + 111.182 + 22.715 = $134 Mil.
Total Current Assets was $298 Mil.
Total Assets was $1,153 Mil.
Property, Plant and Equipment(Net PPE) was $501 Mil.
Depreciation, Depletion and Amortization(DDA) was $21 Mil.
Selling, General & Admin. Expense(SGA) was $71 Mil.
Total Current Liabilities was $122 Mil.
Long-Term Debt was $265 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)|
|=||(97.493 / 1646.559)||/||(59.888 / 1326.553)|
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)|
|=||(133.609 / 1326.553)||/||(160.034 / 1646.559)|
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 - (374.489 + 602.409) / 1153.49)||/||(1 - (298.212 + 500.516) / 1153.404)|
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))|
|=||(21.349 / (21.349 + 500.516))||/||(29.318 / (29.318 + 602.409))|
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)|
|=||(81.224 / 1646.559)||/||(70.651 / 1326.553)|
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)|
|=||((349.349 + 167.973) / 1153.49)||/||((265.258 + 121.607) / 1153.404)|
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|
|=||(-102.612 - 14.111||-||23.337)||/||1153.49|
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 -2.84 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