Renewable Energy Q3 Earnings: Is NasdaqGS:REGI Manipulating Earnings?

in EARNINGS/INVESTING IDEAS by

Renewable Energy Group, Inc. (NasdaqGS:REGI) is scheduled to report Q3 earnings results after markets close for trading on November 5, 2020.

The company is expected to report earnings of $0.71/share on revenue of $554.6 million. The consensus earnings per share (EPS) of $0.71/share is based on a poll of 6 analysts and represents a growth in eps of 989.5% over the same quarter last year, when the company reported earnings of -$0.08/share.

The revenue forecast of $554.6 million based on a poll of 6 analysts implies a year-over-year (YoY) decline in revenue of −5.1%. Last year the company reported $584.4 million in revenue for the quarter.

Expected to report EPS of $0.71/share for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $554.55 $584.37 −5.1%
EPS $0.71 -$0.08 989.5%

Earnings Call Trends

Historically, management has exceeded analyst expectations 3 out of the last 7 tracked quarters, and missed expectations 4 quarters.

What are your expectations from Renewable Energy Group, Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 -$0.02 $0.02 220.0% Beat
Q1, 2020 $0.51 $1.72 237.3% Beat
Q4, 2019 $0.01 -$0.17 −1,259.3% Missed
Q3, 2019 $0.04 -$0.08 −298.6% Missed
Q2, 2019 -$0.60 -$1.52 -153.3% Missed
Q1, 2019 -$0.78 -$1.10 -41.0% Missed
Q4, 2018 $0.58 $0.72 23.6% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by increasing 9.1%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 4, 2020 $28.43 $31.02 9.1% Increase
April 30, 2020 $24.98 $23.06 −7.7% Decline
March 5, 2020 $27.48 $26.99 −1.8% Decline
November 5, 2019 $16.67 $17.29 3.7% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −0.85, the model suggests that the company is likely an earnings manipulator. A value of −0.85 implies a 19.8% chance of earnings manipulation.

Fundamentals And Technical Analysis

Renewable Energy Group, Inc. is currently trading at $55.15/share, down −6.7% for the day. The company is trading at approximately 83.6% of its 52-week high of $65.65/share. The company’s stock price is up 77.8% since the last earnings report and down −7.4% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 59.86 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:REGI Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 3.90 and a forward P/E multiple of 16.13.

Renewable Energy Group, Inc.’s current share price also implies a price-to-book (P/B) multiple of 1.86. The following table summarizes some other key fundamental ratios:

Data as of October 28, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $55.15
P/E Ratio 3.9x
P/E Ratio (Fwd) 16.1x
PEG Ratio 0.0
Total Debt / Total Capital 4.2%
Levered Free Cash Flow $432.5 million
EV / EBITDA 3.0x

Finbox

Renewable Energy Group, Inc. is a mid-cap stock with a market capitalization of $2.323 billion and a total enterprise value of $2.094 billion. The company operates in the Energy sector and the Oil, Gas & Consumable Fuels industry.

Renewable Energy Group, Inc. provides lower carbon transportation fuels in the United States and internationally. The company utilizes an integrated production, distribution, and logistics system to convert natural fats, oils, and greases into advanced biofuels. It operates through Biomass-Based Diesel, Services, and Corporate and Other segments. The company produces biomass-based diesel from various carbon feedstocks, including distillers corn and used cooking oils, and inedible animal fats, as well as from soybean or canola oils. It is also involved in the purchase and resale of biomass-based diesel, petroleum-based diesel, renewable identification numbers, California Low Carbon Fuel Standard credits, and raw material feedstocks acquired from third parties; and sale of biomass-based diesel produced under toll manufacturing arrangements with third party facilities using its feedstocks. In addition, the company provides day-to-day management and operational services to biomass-based diesel production facilities; and construction management and general contracting services for the construction or upgrade of biomass-based diesel production facilities. Further, it sells petroleum-based heating oils and diesel fuels, as well as operates fermentation facilities. The company owns and operates a network of 13 biorefineries, including eleven biorefineries located in the United States and two biorefineries located in Germany. Renewable Energy Group, Inc. was founded in 1996 and is headquartered in Ames, Iowa.

Expertise: financial technology, analyzing market trends. Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors. Brian can be reached at brian@finbox.io or at +1 (516) 778-6257.

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