Intrinsic value of Renewable Energy Group - REGI

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$10.45

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$10.45

 
Intrinsic value

$798.53

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence* premium content

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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 0.4

 

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
  44.30
  40.37
  36.83
  33.65
  30.78
  28.21
  25.89
  23.80
  21.92
  20.23
  18.70
  17.33
  16.10
  14.99
  13.99
  13.09
  12.28
  11.55
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.13
  7.82
  7.54
  7.29
  7.06
  6.85
Revenue, $m
  2,041
  2,945
  4,134
  5,657
  7,560
  9,888
  12,677
  15,958
  19,756
  24,086
  28,957
  34,373
  40,331
  46,824
  53,843
  61,376
  69,411
  77,936
  86,941
  96,416
  106,356
  116,755
  127,614
  138,933
  150,719
  162,980
  175,727
  188,975
  202,743
  217,050
  231,920
Variable operating expenses, $m
 
  2,017
  2,830
  3,872
  5,175
  6,767
  8,675
  10,920
  13,519
  16,481
  19,815
  23,519
  27,595
  32,038
  36,840
  41,994
  47,492
  53,325
  59,486
  65,970
  72,770
  79,886
  87,315
  95,060
  103,124
  111,513
  120,235
  129,300
  138,720
  148,509
  158,683
Fixed operating expenses, $m
 
  622
  638
  654
  670
  687
  704
  722
  740
  758
  777
  796
  816
  837
  858
  879
  901
  924
  947
  970
  995
  1,020
  1,045
  1,071
  1,098
  1,125
  1,153
  1,182
  1,212
  1,242
  1,273
Total operating expenses, $m
  1,990
  2,639
  3,468
  4,526
  5,845
  7,454
  9,379
  11,642
  14,259
  17,239
  20,592
  24,315
  28,411
  32,875
  37,698
  42,873
  48,393
  54,249
  60,433
  66,940
  73,765
  80,906
  88,360
  96,131
  104,222
  112,638
  121,388
  130,482
  139,932
  149,751
  159,956
Operating income, $m
  52
  306
  666
  1,131
  1,716
  2,434
  3,298
  4,316
  5,497
  6,846
  8,366
  10,058
  11,920
  13,950
  16,145
  18,502
  21,018
  23,687
  26,508
  29,476
  32,591
  35,850
  39,253
  42,802
  46,497
  50,341
  54,338
  58,493
  62,811
  67,299
  71,963
EBITDA, $m
  84
  353
  731
  1,219
  1,833
  2,587
  3,493
  4,562
  5,801
  7,216
  8,810
  10,584
  12,537
  14,666
  16,969
  19,442
  22,080
  24,880
  27,838
  30,952
  34,218
  37,637
  41,206
  44,928
  48,803
  52,835
  57,027
  61,385
  65,914
  70,620
  75,512
Interest expense (income), $m
  10
  8
  16
  25
  37
  52
  70
  92
  118
  148
  183
  221
  264
  311
  362
  418
  477
  540
  608
  679
  754
  832
  914
  1,000
  1,089
  1,182
  1,279
  1,380
  1,485
  1,593
  1,706
Earnings before tax, $m
  49
  298
  651
  1,106
  1,679
  2,382
  3,227
  4,224
  5,379
  6,698
  8,183
  9,837
  11,656
  13,639
  15,783
  18,085
  20,541
  23,147
  25,900
  28,797
  31,837
  35,018
  38,339
  41,802
  45,407
  49,159
  53,059
  57,113
  61,326
  65,705
  70,257
Tax expense, $m
  4
  80
  176
  299
  453
  643
  871
  1,140
  1,452
  1,808
  2,209
  2,656
  3,147
  3,682
  4,261
  4,883
  5,546
  6,250
  6,993
  7,775
  8,596
  9,455
  10,352
  11,286
  12,260
  13,273
  14,326
  15,421
  16,558
  17,740
  18,969
Net income, $m
  44
  217
  475
  807
  1,226
  1,739
  2,356
  3,083
  3,927
  4,889
  5,974
  7,181
  8,509
  9,956
  11,522
  13,202
  14,995
  16,897
  18,907
  21,022
  23,241
  25,563
  27,987
  30,515
  33,147
  35,886
  38,733
  41,693
  44,768
  47,965
  51,288

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
  1,473
  2,068
  2,830
  3,782
  4,946
  6,342
  7,983
  9,883
  12,049
  14,486
  17,195
  20,176
  23,424
  26,935
  30,703
  34,723
  38,988
  43,492
  48,232
  53,204
  58,407
  63,839
  69,501
  75,397
  81,531
  87,907
  94,535
  101,422
  108,579
  116,018
Adjusted assets (=assets-cash), $m
  1,021
  1,473
  2,068
  2,830
  3,782
  4,946
  6,342
  7,983
  9,883
  12,049
  14,486
  17,195
  20,176
  23,424
  26,935
  30,703
  34,723
  38,988
  43,492
  48,232
  53,204
  58,407
  63,839
  69,501
  75,397
  81,531
  87,907
  94,535
  101,422
  108,579
  116,018
Revenue / Adjusted assets
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
  1.999
Average production assets, $m
  618
  892
  1,253
  1,714
  2,291
  2,996
  3,841
  4,835
  5,986
  7,298
  8,774
  10,415
  12,220
  14,188
  16,314
  18,597
  21,031
  23,615
  26,343
  29,214
  32,226
  35,377
  38,667
  42,097
  45,668
  49,383
  53,245
  57,259
  61,431
  65,766
  70,272
Working capital, $m
  229
  265
  372
  509
  680
  890
  1,141
  1,436
  1,778
  2,168
  2,606
  3,094
  3,630
  4,214
  4,846
  5,524
  6,247
  7,014
  7,825
  8,677
  9,572
  10,508
  11,485
  12,504
  13,565
  14,668
  15,815
  17,008
  18,247
  19,534
  20,873
Total debt, $m
  311
  445
  714
  1,057
  1,487
  2,012
  2,641
  3,381
  4,238
  5,215
  6,314
  7,536
  8,880
  10,345
  11,929
  13,628
  15,441
  17,364
  19,396
  21,534
  23,776
  26,122
  28,572
  31,126
  33,785
  36,551
  39,427
  42,416
  45,522
  48,750
  52,105
Total liabilities, $m
  529
  664
  933
  1,276
  1,706
  2,231
  2,860
  3,600
  4,457
  5,434
  6,533
  7,755
  9,099
  10,564
  12,148
  13,847
  15,660
  17,583
  19,615
  21,753
  23,995
  26,341
  28,791
  31,345
  34,004
  36,770
  39,646
  42,635
  45,741
  48,969
  52,324
Total equity, $m
  607
  809
  1,135
  1,554
  2,076
  2,716
  3,482
  4,383
  5,426
  6,615
  7,953
  9,440
  11,076
  12,860
  14,787
  16,856
  19,063
  21,404
  23,877
  26,480
  29,209
  32,065
  35,047
  38,156
  41,393
  44,760
  48,261
  51,900
  55,681
  59,610
  63,694
Total liabilities and equity, $m
  1,136
  1,473
  2,068
  2,830
  3,782
  4,947
  6,342
  7,983
  9,883
  12,049
  14,486
  17,195
  20,175
  23,424
  26,935
  30,703
  34,723
  38,987
  43,492
  48,233
  53,204
  58,406
  63,838
  69,501
  75,397
  81,530
  87,907
  94,535
  101,422
  108,579
  116,018
Debt-to-equity ratio
  0.512
  0.550
  0.630
  0.680
  0.720
  0.740
  0.760
  0.770
  0.780
  0.790
  0.790
  0.800
  0.800
  0.800
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
Adjusted equity ratio
  0.533
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549
  0.549

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  44
  217
  475
  807
  1,226
  1,739
  2,356
  3,083
  3,927
  4,889
  5,974
  7,181
  8,509
  9,956
  11,522
  13,202
  14,995
  16,897
  18,907
  21,022
  23,241
  25,563
  27,987
  30,515
  33,147
  35,886
  38,733
  41,693
  44,768
  47,965
  51,288
Depreciation, amort., depletion, $m
  32
  47
  65
  88
  117
  153
  196
  246
  304
  370
  445
  526
  617
  717
  824
  939
  1,062
  1,193
  1,330
  1,475
  1,628
  1,787
  1,953
  2,126
  2,306
  2,494
  2,689
  2,892
  3,103
  3,322
  3,549
Funds from operations, $m
  57
  264
  540
  896
  1,343
  1,892
  2,551
  3,329
  4,231
  5,260
  6,418
  7,707
  9,126
  10,673
  12,346
  14,141
  16,057
  18,090
  20,238
  22,498
  24,869
  27,350
  29,940
  32,641
  35,454
  38,380
  41,422
  44,584
  47,871
  51,286
  54,837
Change in working capital, $m
  -18
  81
  107
  137
  171
  209
  251
  295
  342
  390
  438
  487
  536
  584
  632
  678
  723
  767
  810
  853
  895
  936
  977
  1,019
  1,061
  1,103
  1,147
  1,192
  1,239
  1,288
  1,338
Cash from operations, $m
  75
  194
  433
  759
  1,172
  1,682
  2,300
  3,034
  3,889
  4,870
  5,980
  7,220
  8,590
  10,088
  11,714
  13,463
  15,334
  17,323
  19,427
  21,645
  23,974
  26,414
  28,963
  31,623
  34,393
  37,276
  40,275
  43,392
  46,632
  49,999
  53,498
Maintenance CAPEX, $m
  0
  -31
  -45
  -63
  -87
  -116
  -151
  -194
  -244
  -302
  -369
  -443
  -526
  -617
  -717
  -824
  -939
  -1,062
  -1,193
  -1,330
  -1,475
  -1,628
  -1,787
  -1,953
  -2,126
  -2,306
  -2,494
  -2,689
  -2,892
  -3,103
  -3,322
New CAPEX, $m
  -61
  -275
  -360
  -461
  -577
  -705
  -845
  -994
  -1,151
  -1,312
  -1,476
  -1,641
  -1,805
  -1,967
  -2,127
  -2,282
  -2,435
  -2,583
  -2,728
  -2,871
  -3,012
  -3,151
  -3,290
  -3,430
  -3,571
  -3,715
  -3,862
  -4,014
  -4,172
  -4,335
  -4,506
Cash from investing activities, $m
  -64
  -306
  -405
  -524
  -664
  -821
  -996
  -1,188
  -1,395
  -1,614
  -1,845
  -2,084
  -2,331
  -2,584
  -2,844
  -3,106
  -3,374
  -3,645
  -3,921
  -4,201
  -4,487
  -4,779
  -5,077
  -5,383
  -5,697
  -6,021
  -6,356
  -6,703
  -7,064
  -7,438
  -7,828
Free cash flow, $m
  11
  -112
  27
  234
  508
  861
  1,304
  1,846
  2,494
  3,256
  4,135
  5,135
  6,258
  7,504
  8,871
  10,357
  11,960
  13,677
  15,506
  17,443
  19,487
  21,635
  23,886
  26,240
  28,696
  31,255
  33,918
  36,689
  39,568
  42,561
  45,671
Issuance/(repayment) of debt, $m
  123
  204
  268
  344
  429
  525
  629
  740
  857
  977
  1,099
  1,222
  1,344
  1,465
  1,584
  1,700
  1,813
  1,923
  2,032
  2,138
  2,242
  2,346
  2,450
  2,554
  2,659
  2,766
  2,876
  2,989
  3,106
  3,228
  3,355
Issuance/(repurchase) of shares, $m
  -51
  109
  31
  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 from financing (excl. dividends), $m  
  58
  313
  299
  344
  429
  525
  629
  740
  857
  977
  1,099
  1,222
  1,344
  1,465
  1,584
  1,700
  1,813
  1,923
  2,032
  2,138
  2,242
  2,346
  2,450
  2,554
  2,659
  2,766
  2,876
  2,989
  3,106
  3,228
  3,355
Total cash flow (excl. dividends), $m
  69
  93
  296
  577
  938
  1,386
  1,933
  2,586
  3,351
  4,233
  5,234
  6,357
  7,603
  8,969
  10,454
  12,056
  13,773
  15,601
  17,538
  19,581
  21,729
  23,981
  26,336
  28,794
  31,355
  34,021
  36,794
  39,678
  42,674
  45,789
  49,026
Retained Cash Flow (-), $m
  4
  -248
  -327
  -418
  -523
  -639
  -766
  -901
  -1,043
  -1,189
  -1,338
  -1,487
  -1,636
  -1,783
  -1,928
  -2,069
  -2,207
  -2,341
  -2,473
  -2,602
  -2,730
  -2,856
  -2,982
  -3,109
  -3,237
  -3,367
  -3,501
  -3,639
  -3,781
  -3,929
  -4,084
Prev. year cash balance distribution, $m
 
  46
  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
  159
  415
  747
  1,167
  1,685
  2,308
  3,043
  3,896
  4,870
  5,966
  7,186
  8,527
  9,987
  11,566
  13,259
  15,064
  16,979
  19,000
  21,125
  23,354
  25,685
  28,118
  30,654
  33,294
  36,039
  38,893
  41,860
  44,942
Discount rate, %
 
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
PV of cash for distribution, $m
 
  0
  0
  137
  337
  569
  829
  1,108
  1,397
  1,684
  1,956
  2,200
  2,404
  2,561
  2,661
  2,702
  2,683
  2,607
  2,480
  2,310
  2,107
  1,882
  1,645
  1,408
  1,179
  965
  772
  603
  460
  342
  247
Current shareholders' claim on cash, %
  100
  78.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2

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 9.2
Price to Sales 0.2
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow 5.4
Price to Free Cash Flow 28.8
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 $2041 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 44.3% 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 4.6%, 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 68.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $607 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 30.3%.

Life of production assets of 19.8 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 9%. 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 - $607 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 39.705 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 $0.4 billion.


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COMPANY NEWS

▶ 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
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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