Intrinsic value of Renewable Energy Group - REGI

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$12.00

  Intrinsic Value

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  Value-price divergence*

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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of REGI stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  47.15
  58.20
  52.88
  48.09
  43.78
  39.90
  36.41
  33.27
  30.45
  27.90
  25.61
  23.55
  21.69
  20.03
  18.52
  17.17
  15.95
  14.86
  13.87
  12.99
  12.19
  11.47
  10.82
  10.24
  9.72
  9.24
  8.82
  8.44
  8.09
  7.78
  7.51
Revenue, $m
  2,041
  2,194
  3,355
  4,968
  7,143
  9,993
  13,632
  18,168
  23,699
  30,311
  38,074
  47,041
  57,246
  68,710
  81,437
  95,420
  110,643
  127,082
  144,711
  163,502
  183,427
  204,462
  226,587
  249,788
  274,055
  299,387
  325,791
  353,279
  381,872
  411,597
  442,491
Variable operating expenses, $m
 
  2,035
  3,111
  4,606
  6,622
  9,264
  12,636
  16,840
  21,967
  28,096
  35,291
  43,600
  53,058
  63,684
  75,479
  88,440
  102,549
  117,785
  134,125
  151,541
  170,009
  189,505
  210,012
  231,515
  254,007
  277,486
  301,958
  327,435
  353,936
  381,487
  410,121
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  1,990
  2,035
  3,111
  4,606
  6,622
  9,264
  12,636
  16,840
  21,967
  28,096
  35,291
  43,600
  53,058
  63,684
  75,479
  88,440
  102,549
  117,785
  134,125
  151,541
  170,009
  189,505
  210,012
  231,515
  254,007
  277,486
  301,958
  327,435
  353,936
  381,487
  410,121
Operating income, $m
  52
  159
  244
  362
  521
  729
  996
  1,327
  1,732
  2,216
  2,784
  3,441
  4,188
  5,026
  5,957
  6,980
  8,094
  9,297
  10,586
  11,961
  13,418
  14,957
  16,576
  18,273
  20,048
  21,901
  23,833
  25,844
  27,935
  30,110
  32,370
EBITDA, $m
  84
  194
  297
  439
  632
  884
  1,206
  1,607
  2,096
  2,681
  3,368
  4,161
  5,064
  6,078
  7,203
  8,440
  9,787
  11,241
  12,800
  14,462
  16,225
  18,086
  20,043
  22,095
  24,241
  26,482
  28,818
  31,249
  33,778
  36,408
  39,140
Interest expense (income), $m
  10
  9
  21
  38
  62
  94
  136
  190
  256
  338
  435
  549
  681
  831
  1,000
  1,187
  1,393
  1,617
  1,859
  2,119
  2,395
  2,688
  2,998
  3,324
  3,665
  4,022
  4,395
  4,784
  5,188
  5,609
  6,046
Earnings before tax, $m
  49
  150
  223
  323
  459
  635
  860
  1,138
  1,476
  1,878
  2,349
  2,892
  3,507
  4,195
  4,957
  5,793
  6,701
  7,679
  8,727
  9,842
  11,023
  12,269
  13,578
  14,949
  16,383
  17,879
  19,438
  21,060
  22,747
  24,501
  26,324
Tax expense, $m
  4
  40
  60
  87
  124
  172
  232
  307
  398
  507
  634
  781
  947
  1,133
  1,338
  1,564
  1,809
  2,073
  2,356
  2,657
  2,976
  3,313
  3,666
  4,036
  4,423
  4,827
  5,248
  5,686
  6,142
  6,615
  7,107
Net income, $m
  44
  109
  162
  236
  335
  464
  628
  831
  1,077
  1,371
  1,714
  2,111
  2,560
  3,062
  3,619
  4,229
  4,891
  5,606
  6,371
  7,185
  8,047
  8,956
  9,912
  10,913
  11,960
  13,052
  14,190
  15,374
  16,605
  17,886
  19,216

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  116
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,137
  1,856
  2,838
  4,203
  6,043
  8,454
  11,533
  15,370
  20,050
  25,644
  32,212
  39,798
  48,432
  58,130
  68,897
  80,728
  93,606
  107,514
  122,429
  138,327
  155,184
  172,980
  191,698
  211,326
  231,857
  253,289
  275,627
  298,882
  323,072
  348,221
  374,358
Adjusted assets (=assets-cash), $m
  1,021
  1,856
  2,838
  4,203
  6,043
  8,454
  11,533
  15,370
  20,050
  25,644
  32,212
  39,798
  48,432
  58,130
  68,897
  80,728
  93,606
  107,514
  122,429
  138,327
  155,184
  172,980
  191,698
  211,326
  231,857
  253,289
  275,627
  298,882
  323,072
  348,221
  374,358
Revenue / Adjusted assets
  1.999
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
  1.182
Average production assets, $m
  618
  893
  1,365
  2,022
  2,907
  4,067
  5,548
  7,394
  9,646
  12,337
  15,496
  19,146
  23,299
  27,965
  33,145
  38,836
  45,032
  51,722
  58,897
  66,545
  74,655
  83,216
  92,221
  101,664
  111,540
  121,851
  132,597
  143,784
  155,422
  167,520
  180,094
Working capital, $m
  229
  255
  389
  576
  829
  1,159
  1,581
  2,107
  2,749
  3,516
  4,417
  5,457
  6,641
  7,970
  9,447
  11,069
  12,835
  14,742
  16,786
  18,966
  21,278
  23,718
  26,284
  28,975
  31,790
  34,729
  37,792
  40,980
  44,297
  47,745
  51,329
Total debt, $m
  311
  608
  1,095
  1,774
  2,688
  3,887
  5,417
  7,324
  9,650
  12,430
  15,694
  19,464
  23,756
  28,576
  33,927
  39,807
  46,207
  53,120
  60,532
  68,433
  76,811
  85,656
  94,959
  104,714
  114,918
  125,569
  136,671
  148,229
  160,252
  172,751
  185,741
Total liabilities, $m
  529
  923
  1,410
  2,089
  3,003
  4,202
  5,732
  7,639
  9,965
  12,745
  16,009
  19,779
  24,071
  28,891
  34,242
  40,122
  46,522
  53,435
  60,847
  68,748
  77,126
  85,971
  95,274
  105,029
  115,233
  125,884
  136,986
  148,544
  160,567
  173,066
  186,056
Total equity, $m
  607
  934
  1,428
  2,114
  3,040
  4,253
  5,801
  7,731
  10,085
  12,899
  16,203
  20,018
  24,361
  29,239
  34,655
  40,606
  47,084
  54,080
  61,582
  69,578
  78,057
  87,009
  96,424
  106,297
  116,624
  127,404
  138,640
  150,338
  162,505
  175,155
  188,302
Total liabilities and equity, $m
  1,136
  1,857
  2,838
  4,203
  6,043
  8,455
  11,533
  15,370
  20,050
  25,644
  32,212
  39,797
  48,432
  58,130
  68,897
  80,728
  93,606
  107,515
  122,429
  138,326
  155,183
  172,980
  191,698
  211,326
  231,857
  253,288
  275,626
  298,882
  323,072
  348,221
  374,358
Debt-to-equity ratio
  0.512
  0.650
  0.770
  0.840
  0.880
  0.910
  0.930
  0.950
  0.960
  0.960
  0.970
  0.970
  0.980
  0.980
  0.980
  0.980
  0.980
  0.980
  0.980
  0.980
  0.980
  0.980
  0.980
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
Adjusted equity ratio
  0.533
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503
  0.503

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  44
  109
  162
  236
  335
  464
  628
  831
  1,077
  1,371
  1,714
  2,111
  2,560
  3,062
  3,619
  4,229
  4,891
  5,606
  6,371
  7,185
  8,047
  8,956
  9,912
  10,913
  11,960
  13,052
  14,190
  15,374
  16,605
  17,886
  19,216
Depreciation, amort., depletion, $m
  32
  35
  53
  78
  111
  155
  210
  280
  364
  465
  584
  720
  876
  1,051
  1,246
  1,460
  1,693
  1,944
  2,214
  2,502
  2,807
  3,128
  3,467
  3,822
  4,193
  4,581
  4,985
  5,405
  5,843
  6,298
  6,770
Funds from operations, $m
  57
  144
  215
  314
  446
  618
  838
  1,110
  1,442
  1,836
  2,299
  2,831
  3,436
  4,114
  4,865
  5,689
  6,584
  7,550
  8,585
  9,686
  10,853
  12,085
  13,379
  14,735
  16,153
  17,633
  19,174
  20,779
  22,448
  24,183
  25,987
Change in working capital, $m
  -18
  94
  135
  187
  252
  331
  422
  526
  642
  767
  901
  1,040
  1,184
  1,330
  1,476
  1,622
  1,766
  1,907
  2,045
  2,180
  2,311
  2,440
  2,567
  2,691
  2,815
  2,939
  3,063
  3,189
  3,317
  3,448
  3,584
Cash from operations, $m
  75
  93
  81
  127
  194
  288
  416
  584
  800
  1,069
  1,398
  1,791
  2,252
  2,784
  3,389
  4,067
  4,819
  5,643
  6,540
  7,507
  8,542
  9,645
  10,812
  12,044
  13,338
  14,694
  16,112
  17,591
  19,132
  20,735
  22,403
Maintenance CAPEX, $m
  0
  -21
  -34
  -51
  -76
  -109
  -153
  -209
  -278
  -363
  -464
  -583
  -720
  -876
  -1,051
  -1,246
  -1,460
  -1,693
  -1,944
  -2,214
  -2,502
  -2,807
  -3,128
  -3,467
  -3,822
  -4,193
  -4,581
  -4,985
  -5,405
  -5,843
  -6,298
New CAPEX, $m
  -61
  -329
  -472
  -657
  -885
  -1,160
  -1,481
  -1,846
  -2,251
  -2,691
  -3,160
  -3,649
  -4,154
  -4,666
  -5,180
  -5,691
  -6,196
  -6,691
  -7,175
  -7,648
  -8,110
  -8,561
  -9,005
  -9,442
  -9,877
  -10,310
  -10,746
  -11,188
  -11,637
  -12,098
  -12,574
Cash from investing activities, $m
  -64
  -350
  -506
  -708
  -961
  -1,269
  -1,634
  -2,055
  -2,529
  -3,054
  -3,624
  -4,232
  -4,874
  -5,542
  -6,231
  -6,937
  -7,656
  -8,384
  -9,119
  -9,862
  -10,612
  -11,368
  -12,133
  -12,909
  -13,699
  -14,503
  -15,327
  -16,173
  -17,042
  -17,941
  -18,872
Free cash flow, $m
  11
  -258
  -425
  -581
  -768
  -982
  -1,218
  -1,471
  -1,729
  -1,984
  -2,225
  -2,441
  -2,622
  -2,758
  -2,843
  -2,870
  -2,837
  -2,740
  -2,580
  -2,355
  -2,069
  -1,723
  -1,321
  -866
  -361
  190
  785
  1,418
  2,089
  2,794
  3,531
Issuance/(repayment) of debt, $m
  123
  340
  488
  678
  915
  1,198
  1,530
  1,907
  2,326
  2,780
  3,264
  3,770
  4,291
  4,820
  5,351
  5,880
  6,401
  6,912
  7,413
  7,901
  8,378
  8,845
  9,303
  9,755
  10,204
  10,652
  11,102
  11,558
  12,023
  12,499
  12,990
Issuance/(repurchase) of shares, $m
  -51
  241
  431
  590
  779
  996
  1,237
  1,494
  1,757
  2,018
  2,265
  2,487
  2,673
  2,816
  2,907
  2,941
  2,914
  2,824
  2,669
  2,451
  2,170
  1,830
  1,433
  984
  484
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  58
  581
  919
  1,268
  1,694
  2,194
  2,767
  3,401
  4,083
  4,798
  5,529
  6,257
  6,964
  7,636
  8,258
  8,821
  9,315
  9,736
  10,082
  10,352
  10,548
  10,675
  10,736
  10,739
  10,688
  10,652
  11,102
  11,558
  12,023
  12,499
  12,990
Total cash flow (excl. dividends), $m
  69
  82
  63
  97
  147
  217
  312
  437
  596
  796
  1,039
  1,329
  1,670
  2,062
  2,509
  3,009
  3,564
  4,172
  4,833
  5,546
  6,309
  7,121
  7,982
  8,889
  9,843
  10,842
  11,887
  12,976
  14,111
  15,293
  16,521
Retained Cash Flow (-), $m
  4
  -344
  -494
  -687
  -926
  -1,213
  -1,549
  -1,930
  -2,354
  -2,814
  -3,304
  -3,816
  -4,343
  -4,878
  -5,416
  -5,950
  -6,478
  -6,996
  -7,502
  -7,996
  -8,479
  -8,952
  -9,415
  -9,873
  -10,327
  -10,780
  -11,236
  -11,697
  -12,168
  -12,650
  -13,147
Prev. year cash balance distribution, $m
 
  21
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  62
  650
  1,279
  1,944
  2,643
  3,375
Discount rate, %
 
  6.40
  6.72
  7.06
  7.41
  7.78
  8.17
  8.58
  9.01
  9.46
  9.93
  10.42
  10.95
  11.49
  12.07
  12.67
  13.31
  13.97
  14.67
  15.40
  16.17
  16.98
  17.83
  18.72
  19.66
  20.64
  21.67
  22.76
  23.89
  25.09
  26.34
PV of cash for distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  4
  5
  5
  4
  3
Current shareholders' claim on cash, %
  100
  65.5
  41.0
  26.8
  18.1
  12.7
  9.3
  7.0
  5.4
  4.3
  3.5
  2.9
  2.5
  2.2
  1.9
  1.7
  1.6
  1.5
  1.4
  1.3
  1.3
  1.2
  1.2
  1.2
  1.2
  1.2
  1.2
  1.2
  1.2
  1.2
  1.2

Renewable Energy Group, Inc. produces and sells biofuels and renewable chemicals in the United States. It operates through Biomass-Based Diesel, Services, Renewable Chemicals, and Corporate and Other segments. The Biomass-Based Diesel segment acquires feedstock; manages, constructs, and operates biomass-based diesel production facilities; and markets, sells, and distributes biomass-based diesel and its co-products. This segment produces biomass-based diesel from a range of feedstocks, including inedible corn oil, used cooking oil, soybean oil, canola oil, and inedible animal fat. It is also involved in purchase and resale of biomass-based diesel, petroleum-based diesel, renewable identification numbers, and raw material feedstocks acquired from third parties; and sale of glycerin, free fatty acids, naphtha, and other co-products of the biomass-based diesel production process. The Services segment provides facility management and operational services to biomass-based diesel production facilities, as well as to other clean-tech companies. This segment also offers construction management services for biomass-based diesel production facilities. The Renewable Chemicals segment engages in the production of renewable chemicals, advanced biofuels, and other products. The Corporate and Other segment trades petroleum-based heating oil and diesel fuel. Renewable Energy Group, Inc. was founded in 1996 and is headquartered in Ames, Iowa.

FINANCIAL RATIOS  of  Renewable Energy Group (REGI)

Valuation Ratios
P/E Ratio 10.5
Price to Sales 0.2
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 6.2
Price to Free Cash Flow 33
Growth Rates
Sales Growth Rate 47.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -4.7%
Cap. Spend. - 3 Yr. Gr. Rate 9.4%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity 39.7%
Total Debt to Equity 51.2%
Interest Coverage 6
Management Effectiveness
Return On Assets 4.5%
Ret/ On Assets - 3 Yr. Avg. 0.5%
Return On Total Capital 4.8%
Ret/ On T. Cap. - 3 Yr. Avg. -0.3%
Return On Equity 7.2%
Return On Equity - 3 Yr. Avg. -0.8%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 8.4%
Gross Margin - 3 Yr. Avg. 9.7%
EBITDA Margin 4.5%
EBITDA Margin - 3 Yr. Avg. 1.2%
Operating Margin 2.5%
Oper. Margin - 3 Yr. Avg. -0.5%
Pre-Tax Margin 2.4%
Pre-Tax Margin - 3 Yr. Avg. -0.8%
Net Profit Margin 2.2%
Net Profit Margin - 3 Yr. Avg. -0.7%
Effective Tax Rate 8.2%
Eff/ Tax Rate - 3 Yr. Avg. 5.6%
Payout Ratio 0%

REGI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the REGI stock intrinsic value calculation we used $1387 million for the last fiscal year's total revenue generated by Renewable Energy Group. The default revenue input number comes from 2016 income statement of Renewable Energy Group. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our REGI stock valuation model: a) initial revenue growth rate of 58.2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6.4%, whose default value for REGI is calculated based on our internal credit rating of Renewable Energy Group, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Renewable Energy Group.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of REGI stock the variable cost ratio is equal to 92.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for REGI stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Renewable Energy Group.

Corporate tax rate of 27% is the nominal tax rate for Renewable Energy Group. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the REGI stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for REGI are equal to 40.7%.

Life of production assets of 26.6 years is the average useful life of capital assets used in Renewable Energy Group operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for REGI is equal to 11.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $611 million for Renewable Energy Group - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 39.44 million for Renewable Energy Group is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Renewable Energy Group at the current share price and the inputted number of shares is $0.5 billion.


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COMPANY NEWS

▶ Renewable Energy Group reports 1Q loss   [05:02AM  Associated Press]
▶ REG to Purchase Geismar Land   [11:12AM  GlobeNewswire]
▶ Renewable Energy Group posts 4Q profit   [Mar-07-17 06:18PM  Associated Press]
▶ REG Announces Several Milestones   [08:00AM  GlobeNewswire]
▶ How Supreme Industries, Inc. (STS) Stacks Up Against Its Peers?   [Dec-13-16 08:36AM  at Insider Monkey]
▶ Is Renewable Energy Group Inc (REGI) A Good Stock To Buy?   [Dec-06-16 06:27AM  at Insider Monkey]
▶ REG Supports EPA Final Rule Increasing Advanced Biofuel RVO   [Nov-23-16 12:53PM  Business Wire]
▶ REG Breaks Ground for Ralston Biorefinery Expansion   [Nov-11-16 10:26AM  Business Wire]
▶ Top 5 Clean Energy Stocks of 2016 (CSIQ, PEGI)   [Sep-07-16 02:00PM  at Investopedia]
▶ The Best Diesel Stocks to Play Rising Oil Prices   [Aug-27-16 09:47AM  at Motley Fool]
▶ These Biofuel Stocks Soared Up to 25% in July   [Aug-10-16 07:07PM  at Motley Fool]
Stock chart of REGI Financial statements of REGI Annual reports of REGI
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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