Renewable Energy Group, Inc. (NASDAQ:REGI): Commentary On Fundamentals

I’ve been keeping an eye on Renewable Energy Group, Inc. (NASDAQ:REGI) because I’m attracted to its fundamentals. Looking at the company as a whole, as a potential stock investment, I believe REGI has a lot to offer. Basically, it is a financially-healthy company with a an impressive history of performance, trading at a great value. Below is a brief commentary on these key aspects. If you’re interested in understanding beyond my broad commentary, take a look at the report on Renewable Energy Group here.

Excellent balance sheet and good value

REGI has a strong track record of performance. In the previous year, REGI delivered an impressive double-digit return of 40% Unsurprisingly, REGI surpassed the Oil and Gas industry return of 12%, which gives us more confidence of the company’s capacity to drive earnings going forward. REGI is financially robust, with ample cash on hand and short-term investments to meet upcoming liabilities. This suggests prudent control over cash and cost by management, which is a crucial insight into the health of the company. REGI seems to have put its debt to good use, generating operating cash levels of 1.85x total debt in the most recent year. This is also a good indication as to whether debt is properly covered by the company’s cash flows.

NasdaqGS:REGI Income Statement, March 11th 2019
NasdaqGS:REGI Income Statement, March 11th 2019

REGI is currently trading below its true value, which means the market is undervaluing the company’s expected cash flow going forward. According to my intrinsic value of the stock, which is driven by analyst consensus forecast of REGI’s earnings, investors now have the opportunity to buy into the stock to reap capital gains. Compared to the rest of the oil and gas industry, REGI is also trading below its peers, relative to earnings generated. This supports the theory that REGI is potentially underpriced.

NasdaqGS:REGI Price Estimation Relative to Market, March 12th 2019
NasdaqGS:REGI Price Estimation Relative to Market, March 12th 2019

Next Steps:

For Renewable Energy Group, I’ve put together three essential factors you should further research:

  1. Future Outlook: What are well-informed industry analysts predicting for REGI’s future growth? Take a look at our free research report of analyst consensus for REGI’s outlook.
  2. Dividend Income vs Capital Gains: Does REGI return gains to shareholders through reinvesting in itself and growing earnings, or redistribute a decent portion of earnings as dividends? Our historical dividend yield visualization quickly tells you what your can expect from REGI as an investment.
  3. Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of REGI? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.