Intrinsic value of Renewable Energy Group, Inc. - REGI

Previous Close

$14.07

  Intrinsic Value

$4.92

stock screener

  Rating & Target

str. sell

-65%

Previous close

$14.07

 
Intrinsic value

$4.92

 
Up/down potential

-65%

 
Rating

str. sell

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 0001), $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
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  2,431
  2,487
  2,550
  2,622
  2,702
  2,789
  2,884
  2,987
  3,098
  3,216
  3,344
  3,479
  3,624
  3,777
  3,940
  4,113
  4,296
  4,489
  4,693
  4,909
  5,136
  5,376
  5,629
  5,896
  6,176
  6,472
  6,783
  7,110
  7,455
  7,817
Variable operating expenses, $m
  2,501
  2,559
  2,624
  2,698
  2,780
  2,869
  2,967
  3,073
  3,186
  3,309
  3,436
  3,576
  3,724
  3,882
  4,050
  4,227
  4,415
  4,614
  4,823
  5,045
  5,279
  5,525
  5,785
  6,059
  6,348
  6,652
  6,971
  7,308
  7,662
  8,034
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
  2,501
  2,559
  2,624
  2,698
  2,780
  2,869
  2,967
  3,073
  3,186
  3,309
  3,436
  3,576
  3,724
  3,882
  4,050
  4,227
  4,415
  4,614
  4,823
  5,045
  5,279
  5,525
  5,785
  6,059
  6,348
  6,652
  6,971
  7,308
  7,662
  8,034
Operating income, $m
  -70
  -72
  -74
  -76
  -78
  -80
  -83
  -86
  -89
  -92
  -93
  -97
  -101
  -105
  -109
  -114
  -119
  -125
  -130
  -136
  -142
  -149
  -156
  -164
  -171
  -180
  -188
  -197
  -207
  -217
EBITDA, $m
  -31
  -32
  -33
  -34
  -35
  -36
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -72
  -76
  -79
  -83
  -87
  -91
  -96
  -101
Interest expense (income), $m
  10
  14
  15
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  46
  48
  51
  54
  56
  60
Earnings before tax, $m
  -85
  -87
  -89
  -91
  -94
  -97
  -101
  -105
  -109
  -113
  -114
  -119
  -125
  -130
  -136
  -142
  -149
  -156
  -163
  -171
  -179
  -188
  -197
  -207
  -217
  -228
  -239
  -251
  -263
  -276
Tax expense, $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
Net income, $m
  -85
  -87
  -89
  -91
  -94
  -97
  -101
  -105
  -109
  -113
  -114
  -119
  -125
  -130
  -136
  -142
  -149
  -156
  -163
  -171
  -179
  -188
  -197
  -207
  -217
  -228
  -239
  -251
  -263
  -276

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  1,082
  1,107
  1,136
  1,168
  1,203
  1,242
  1,284
  1,330
  1,379
  1,432
  1,489
  1,549
  1,613
  1,682
  1,754
  1,831
  1,913
  1,999
  2,090
  2,186
  2,287
  2,394
  2,506
  2,625
  2,750
  2,882
  3,020
  3,166
  3,319
  3,480
Adjusted assets (=assets-cash), $m
  1,082
  1,107
  1,136
  1,168
  1,203
  1,242
  1,284
  1,330
  1,379
  1,432
  1,489
  1,549
  1,613
  1,682
  1,754
  1,831
  1,913
  1,999
  2,090
  2,186
  2,287
  2,394
  2,506
  2,625
  2,750
  2,882
  3,020
  3,166
  3,319
  3,480
Revenue / Adjusted assets
  2.247
  2.247
  2.245
  2.245
  2.246
  2.246
  2.246
  2.246
  2.247
  2.246
  2.246
  2.246
  2.247
  2.246
  2.246
  2.246
  2.246
  2.246
  2.245
  2.246
  2.246
  2.246
  2.246
  2.246
  2.246
  2.246
  2.246
  2.246
  2.246
  2.246
Average production assets, $m
  615
  629
  645
  663
  684
  706
  730
  756
  784
  814
  846
  880
  917
  956
  997
  1,041
  1,087
  1,136
  1,187
  1,242
  1,300
  1,360
  1,424
  1,492
  1,563
  1,637
  1,716
  1,799
  1,886
  1,978
Working capital, $m
  160
  164
  168
  173
  178
  184
  190
  197
  204
  212
  221
  230
  239
  249
  260
  271
  284
  296
  310
  324
  339
  355
  372
  389
  408
  427
  448
  469
  492
  516
Total debt, $m
  203
  210
  218
  227
  237
  247
  259
  272
  286
  300
  316
  333
  351
  370
  390
  412
  435
  459
  484
  511
  539
  569
  600
  633
  668
  705
  744
  784
  827
  872
Total liabilities, $m
  302
  309
  317
  326
  336
  346
  358
  371
  385
  400
  415
  432
  450
  469
  489
  511
  534
  558
  583
  610
  638
  668
  699
  732
  767
  804
  843
  883
  926
  971
Total equity, $m
  780
  798
  819
  842
  867
  895
  926
  959
  994
  1,033
  1,073
  1,117
  1,163
  1,213
  1,265
  1,320
  1,379
  1,441
  1,507
  1,576
  1,649
  1,726
  1,807
  1,893
  1,983
  2,078
  2,177
  2,283
  2,393
  2,509
Total liabilities and equity, $m
  1,082
  1,107
  1,136
  1,168
  1,203
  1,241
  1,284
  1,330
  1,379
  1,433
  1,488
  1,549
  1,613
  1,682
  1,754
  1,831
  1,913
  1,999
  2,090
  2,186
  2,287
  2,394
  2,506
  2,625
  2,750
  2,882
  3,020
  3,166
  3,319
  3,480
Debt-to-equity ratio
  0.260
  0.260
  0.270
  0.270
  0.270
  0.280
  0.280
  0.280
  0.290
  0.290
  0.290
  0.300
  0.300
  0.310
  0.310
  0.310
  0.320
  0.320
  0.320
  0.320
  0.330
  0.330
  0.330
  0.330
  0.340
  0.340
  0.340
  0.340
  0.350
  0.350
Adjusted equity ratio
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721
  0.721

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -85
  -87
  -89
  -91
  -94
  -97
  -101
  -105
  -109
  -113
  -114
  -119
  -125
  -130
  -136
  -142
  -149
  -156
  -163
  -171
  -179
  -188
  -197
  -207
  -217
  -228
  -239
  -251
  -263
  -276
Depreciation, amort., depletion, $m
  39
  40
  41
  42
  43
  45
  46
  47
  49
  51
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  80
  84
  88
  92
  96
  101
  106
  111
  116
Funds from operations, $m
  -45
  -47
  -48
  -49
  -51
  -53
  -55
  -57
  -59
  -62
  -65
  -68
  -71
  -74
  -77
  -81
  -85
  -89
  -93
  -98
  -103
  -108
  -113
  -119
  -125
  -131
  -138
  -145
  -152
  -160
Change in working capital, $m
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
Cash from operations, $m
  -49
  -50
  -52
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -73
  -76
  -80
  -84
  -88
  -92
  -97
  -102
  -107
  -112
  -118
  -124
  -130
  -137
  -144
  -151
  -159
  -167
  -175
  -184
Maintenance CAPEX, $m
  -35
  -36
  -37
  -38
  -39
  -40
  -42
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -73
  -76
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
New CAPEX, $m
  -12
  -14
  -16
  -18
  -20
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -37
  -39
  -41
  -44
  -46
  -49
  -52
  -55
  -58
  -61
  -64
  -67
  -71
  -75
  -79
  -83
  -87
  -92
Cash from investing activities, $m
  -47
  -50
  -53
  -56
  -59
  -62
  -66
  -69
  -72
  -76
  -80
  -84
  -89
  -93
  -97
  -103
  -107
  -113
  -119
  -125
  -131
  -137
  -144
  -151
  -159
  -167
  -175
  -184
  -193
  -203
Free cash flow, $m
  -96
  -101
  -105
  -110
  -115
  -121
  -127
  -133
  -139
  -146
  -153
  -161
  -168
  -177
  -186
  -195
  -204
  -215
  -225
  -237
  -248
  -261
  -274
  -288
  -302
  -318
  -334
  -350
  -368
  -387
Issuance/(repayment) of debt, $m
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
Issuance/(repurchase) of shares, $m
  100
  105
  109
  114
  120
  125
  131
  138
  144
  151
  155
  163
  171
  179
  188
  198
  207
  218
  229
  240
  252
  265
  278
  292
  307
  323
  339
  356
  374
  393
Cash from financing (excl. dividends), $m  
  106
  112
  117
  123
  130
  136
  143
  151
  158
  166
  171
  180
  189
  198
  208
  219
  230
  242
  254
  267
  280
  295
  309
  325
  342
  360
  378
  397
  417
  438
Total cash flow (excl. dividends), $m
  10
  11
  12
  13
  14
  15
  16
  18
  19
  20
  18
  19
  20
  22
  23
  24
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
Retained Cash Flow (-), $m
  -100
  -105
  -109
  -114
  -120
  -125
  -131
  -138
  -144
  -151
  -155
  -163
  -171
  -179
  -188
  -198
  -207
  -218
  -229
  -240
  -252
  -265
  -278
  -292
  -307
  -323
  -339
  -356
  -374
  -393
Prev. year cash balance 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
  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
  -90
  -94
  -97
  -101
  -106
  -110
  -115
  -120
  -125
  -131
  -137
  -144
  -151
  -158
  -165
  -173
  -182
  -191
  -200
  -210
  -220
  -231
  -243
  -255
  -267
  -281
  -295
  -310
  -325
  -342
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  -86
  -86
  -85
  -83
  -82
  -80
  -78
  -75
  -72
  -69
  -65
  -61
  -57
  -53
  -49
  -44
  -40
  -35
  -31
  -27
  -23
  -19
  -16
  -13
  -10
  -8
  -6
  -5
  -4
  -3
Current shareholders' claim on cash, %
  84.3
  70.8
  59.2
  49.3
  41.0
  34.0
  28.1
  23.2
  19.1
  15.7
  12.9
  10.6
  8.7
  7.1
  5.8
  4.8
  3.9
  3.2
  2.6
  2.1
  1.7
  1.4
  1.1
  0.9
  0.7
  0.6
  0.5
  0.4
  0.3
  0.3

Renewable Energy Group, Inc. is focused on providing cleaner, lower carbon intensity products and services. The Company is a producer of biomass-based diesel in North America. Its segments include Biomass-based diesel, Services, Renewable Chemicals and Corporate and other activities. It is involved in various activities related to biomass-based diesel production, from acquiring feedstock, managing construction and operating biomass-based diesel production facilities to marketing, selling and distributing biomass-based diesel and its co-products. As of December 31, 2016, it owned and operated a network of 14 biorefineries. As of December 31, 2016, 12 biorefineries were located in the United States and two in Germany, and 13 of which produce biodiesel or renewable hydrocarbon diesel and had an aggregate nameplate production capacity of 502 million gallons per year (mmgy). As of December 31, 2016, it also operated one microbial fermentation facility and one feedstock processing facility.

FINANCIAL RATIOS  of  Renewable Energy Group, Inc. (REGI)

Valuation Ratios
P/E Ratio 12.3
Price to Sales 0.3
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 7.2
Price to Free Cash Flow 38.7
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 2.9%
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 $2383 million for the last fiscal year's total revenue generated by Renewable Energy Group, Inc.. The default revenue input number comes from 0001 income statement of Renewable Energy Group, Inc.. 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 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 4.3%, whose default value for REGI is calculated based on our internal credit rating of Renewable Energy Group, Inc., 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, Inc..
    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 102.9%.

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 7.2% for Renewable Energy Group, Inc..

Corporate tax rate of 27% is the nominal tax rate for Renewable Energy Group, Inc.. 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 25.3%.

Life of production assets of 17 years is the average useful life of capital assets used in Renewable Energy Group, Inc. 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 6.6%. 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 - $765.253 million for Renewable Energy Group, Inc. - 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 37.355 million for Renewable Energy Group, Inc. 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, Inc. at the current share price and the inputted number of shares is $0.5 billion.

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