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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 -0.26.
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 * 0.9683||+||0.528 * 1.5935||+||0.404 * 0.5602||+||0.892 * 1.0891||+||0.115 * 0.7285|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0639||+||4.679 * -0.1943||-||0.327 * 1.1424|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|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.
Net Income was -95.609 + -15.675 + -2.001 + -38.107 = $-151 Mil.
Non Operating Income was -1.773 + 3.79 + 3.9 + 0.272 = $6 Mil.
Cash Flow from Operations was -18.897 + 48.774 + -113.739 + 164.022 = $80 Mil.
|Accounts Receivable was $295 Mil.
Revenue was 337.615 + 384.258 + 332.918 + 219.04 = $1,274 Mil.
Gross Profit was 111.182 + 22.715 + 15.151 + 11.564 = $161 Mil.
Total Current Assets was $528 Mil.
Total Assets was $1,368 Mil.
Property, Plant and Equipment(Net PPE) was $493 Mil.
Depreciation, Depletion and Amortization(DDA) was $16 Mil.
Selling, General & Admin. Expense(SGA) was $63 Mil.
Total Current Liabilities was $285 Mil.
Long-Term Debt was $261 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)|
|=||(310.731 / 1387.344)||/||(294.633 / 1273.831)|
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)|
|=||(4.405 / 1273.831)||/||(105.659 / 1387.344)|
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 - (475.584 + 574.584) / 1223.62)||/||(1 - (528.443 + 493.196) / 1367.736)|
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))|
|=||(15.796 / (15.796 + 493.196))||/||(25.567 / (25.567 + 574.584))|
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)|
|=||(72.631 / 1387.344)||/||(62.681 / 1273.831)|
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)|
|=||((264.594 + 293.971) / 1223.62)||/||((261.201 + 285.311) / 1367.736)|
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|
|=||(-151.392 - 6.189||-||80.16)||/||1223.62|
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 -3.29 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