MagneGas Corp. :MNGA-US: Earnings Analysis: Q1, 2017 By the Numbers : May 24, 2017

MagneGas Corp. reports financial results for the quarter ended March 31, 2017.

We analyze the earnings along side the following peers of MagneGas Corp. – Praxair, Inc., Air Products and Chemicals, Inc., Crestwood Equity Partners LP and DCP Midstream LP (PX-US, APD-US, CEQP-US and DCP-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 0.87 million, Net Earnings of USD -1.78 million.
  • Gross margins widened from 21.93% to 23.06% compared to the same period last year, operating (EBITDA) margins now -268.14% from -362.69%.
  • Year-on-year change in operating cash flow of 35.95% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings decline largely a result of non-operational activity, pretax margins improved from -243.58% to -204.31%.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-03-31 2016-12-31 2016-09-30 2016-06-30 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 0.87 1.01 1.04 0.84 0.67
Revenue Growth (%YOY) 30.97 49.51 66.32 43.26 21.99
Earnings (mil) -1.78 -6.63 -4.07 -5.15 -1.62
Earnings Growth (%YOY) -9.85 -154.07 -83.62 -143.05 26.22
Net Margin (%) -204.31 -655.42 -392 -615.13 -243.58
EPS -0.3 -1.2 -0.8 -1 -0.4
Return on Equity (%) -209.62 -474.37 -209.23 -192.52 -44.64
Return on Assets (%) -58.6 -198.47 -106.99 -129.79 -39.38

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Market Share Versus Profits

Revenues History
Earnings History

MNGA-US‘s change in revenue this period compared to the same period last year of 30.97% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that MNGA-US is holding onto its market share. Also, for comparison purposes, revenues changed by -13.83% and earnings by 73.14% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year earnings decline did not come as a result of a contraction in gross margins or because of any cost control issues. Both gross margins and operating margins (EBITDA) margins actually improved over this time frame. Gross margins went from 21.93% to 23.06%, while operating margins improved from -362.69% to -268.14% over this period. For comparison, gross margins were 31.62% and EBITDA margins -264.58% in the immediate last period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

MNGA-US‘s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days have declined to -508.17 days from 743.14 days for the same period last year.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

MNGA-US‘s change in operating cash flow of 35.95% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


The company’s earnings decline is largely a result of non-operational activity. As a matter of fact, the company showed increases in operating (EBIT) and pretax margins. EBIT margins improved from -385.82% to -287.33% and pretax margins widened from -243.58% to -204.31%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

MagneGas Corp. is technology company that produces a plasma based system for the gasification and sterilization of liquid waste. It develops the use of its fuel for co-combustion with hydrocarbon fuels to reduce emissions. It also markets, for sale or licensure, its proprietary plasma arc technology for the processing of liquid waste. The company was founded by Ruggero Maria Santilli on December 9, 2005 and is headquartered in Tarpon Springs, FL.

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