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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 9 years, the highest Beneish M-Score of Renewable Energy Group Inc was 0.43. The lowest was -3.29. And the median was -1.24.
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 * 0.3594||+||0.528 * 0.9045||+||0.404 * 0.4611||+||0.892 * 1.4769||+||0.115 * 0.8194|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.823||+||4.679 * -0.0359||-||0.327 * 0.9104|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $165 Mil.|
Revenue was 560.421 + 624.64 + 558.301 + 305.594 = $2,049 Mil.
Gross Profit was 81.92 + 47.348 + 24.862 + 25.108 = $179 Mil.
Total Current Assets was $463 Mil.
Total Assets was $1,137 Mil.
Property, Plant and Equipment(Net PPE) was $599 Mil.
Depreciation, Depletion and Amortization(DDA) was $33 Mil.
Selling, General & Admin. Expense(SGA) was $88 Mil.
Total Current Liabilities was $234 Mil.
Long-Term Debt was $239 Mil.
Net Income was 20.197 + 23.442 + 7.016 + 1.656 = $52 Mil.
Non Operating Income was 4.127 + 1.575 + 12.167 + -0.073 = $18 Mil.
Cash Flow from Operations was 4.165 + 77.678 + -169.826 + 163.286 = $75 Mil.
|Accounts Receivable was $311 Mil.
Revenue was 387.808 + 394.856 + 373.762 + 230.918 = $1,387 Mil.
Gross Profit was 105.659 + 4.405 + 15.907 + -16.195 = $110 Mil.
Total Current Assets was $476 Mil.
Total Assets was $1,224 Mil.
Property, Plant and Equipment(Net PPE) was $575 Mil.
Depreciation, Depletion and Amortization(DDA) was $26 Mil.
Selling, General & Admin. Expense(SGA) was $73 Mil.
Total Current Liabilities was $294 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)|
|=||(164.949 / 2048.956)||/||(310.731 / 1387.344)|
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)|
|=||(109.776 / 1387.344)||/||(179.238 / 2048.956)|
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 - (462.839 + 599.474) / 1136.603)||/||(1 - (475.584 + 574.584) / 1223.62)|
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))|
|=||(25.567 / (25.567 + 574.584))||/||(32.877 / (32.877 + 599.474))|
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)|
|=||(88.285 / 2048.956)||/||(72.631 / 1387.344)|
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)|
|=||((238.818 + 233.545) / 1136.603)||/||((264.594 + 293.971) / 1223.62)|
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|
|=||(52.311 - 17.796||-||75.303)||/||1136.603|
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 -3.04 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