With a daily gain of 5.36%, Darling Ingredients Inc (DAR, Financial) has recently caught the eye of investors, despite experiencing a 3-month loss of -28.89%. The company's Earnings Per Share (EPS) stands at 4.42, leading to the pressing question: Is Darling Ingredients significantly undervalued? This article delves deep into the company's valuation analysis, providing insights that investors will find crucial in their decision-making process.
Company Introduction
Darling Ingredients Inc develops and manufactures sustainable ingredients for a variety of industries, including pharmaceutical, food, pet food, fuel, and fertilizer. The company is adept at transforming all aspects of animal by-product streams into valuable ingredients. With a significant portion of its revenue derived from its feed ingredients segment, Darling Ingredients also specializes in the recovery and conversion of used cooking oil and bakery remnants into feed and fuel ingredients. It provides grease trap services for food businesses and sells equipment for cooking oil collection and delivery. The majority of its revenue is generated from North America.
Comparing the current stock price of $43.87 with the GF Value of $100.68, an estimation of fair value, suggests that Darling Ingredients (DAR, Financial) may be significantly undervalued. This initial comparison sets the stage for a deeper valuation analysis.
Summarize GF Value
The GF Value is a unique measure reflecting the intrinsic value of a stock, based on historical trading multiples, a GuruFocus adjustment factor for past returns and growth, and future business performance estimates. The GF Value Line indicates the fair trading value of the stock. If the stock price is significantly above this line, it may be overvalued, suggesting poor future returns. Conversely, a price well below the line could indicate undervaluation and the potential for higher future returns.
Darling Ingredients (DAR, Financial) is currently trading at a market cap of $7.30 billion, with the GF Value suggesting a significant undervaluation. This implies that the long-term return of its stock could be much higher than its business growth.
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Financial Strength
Assessing the financial strength of a company is vital before investing in its stock. Darling Ingredients has a cash-to-debt ratio of 0.03, which places it lower than 92.12% of companies in the Consumer Packaged Goods industry. This gives Darling Ingredients a financial strength rating of 5 out of 10, indicating a fair financial position.
Profitability and Growth
Investing in profitable companies, particularly those with consistent long-term profitability, generally poses less risk. Darling Ingredients has a decade-long track record of profitability, with a revenue of $6.90 billion and an Earnings Per Share (EPS) of $4.42 over the past twelve months. Its operating margin of 8.42% ranks well within its industry, leading to a profitability rank of 7 out of 10.
The growth of a company is integral to its valuation. Darling Ingredients's 3-year average revenue growth rate is better than 87.21% of industry peers, and its EBITDA growth rate of 22.7% surpasses 73.48% of competitors, indicating strong growth prospects.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) provides insight into its profitability relative to its capital costs. Darling Ingredients's ROIC is 5.64, below its WACC of 9.81, suggesting room for improvement in generating cash flow relative to capital invested.
Conclusion
In conclusion, Darling Ingredients (DAR, Financial) appears to be significantly undervalued. The company maintains fair financial health and profitability, with growth rates that are promising within the Consumer Packaged Goods industry. For a more detailed look at Darling Ingredients stock, investors can explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
