Darling International (NYSE:DAR) reported first quarter net profit of $46.6 million, or 43 cents a share, quadrupling its EPS of 11 cents a year ago. This was due to higher pricing of its products and strong performance by its newly acquired Griffin Industries unit. Revenue for the quarter was $439.9 million, more than double the $162.8 million in the year-ago quarter. Both sales and profit figures vastly exceeded analyst earnings estimates of 29 cents per share on revenue of $371.3 million.

TUTORIAL: Investment Valuation Ratios

Boring is Good
Most people would be surprised at how Darling makes its money or to even know that such a company exists on a large scale. Darling International is the largest and only publicly traded provider of rendering and bakery waste recycling solutions to the nation's food industry. Darling also recycles beef, pork and poultry waste streams into usable ingredients such as tallow, feed-grade fats, meat and bone meal, poultry meal and hides. In addition, the company recycles used cooking oil and commercial bakery waste into valuable feed and fuel ingredients. In layman's terms, Darling disposes of all the waste that no one wants to touch - hospital waste, restaurant grease and byproducts from meat processing plants. (Is bigger always better? For more, see What Are Economies Of Scale?)

Profit in Waste
With no real competition on a national scale, Darling enjoys a boring yet profitable niche business. The company counts names like fast-food outlet McDonald's (NYSE:MCD) as customers. McDonald's extensive use of frying oil requires a national player like Darling to dispose of all that used grease. Shares have been on a tear recently and now trade at $17, giving the company a $2 billion market cap valuation. Shares now trade hands for 32 times earnings. Darling has no publicly traded peers to be measured against. Ecolab (NYSE:ECL), a $12 billion company that provides cleaning products to customers in food service, healthcare and government, trades for 23 times earnings.

Another appeal to Darling today is the company's joint venture with oil refiner Valero (NYSE:VLO). Together, the two companies are working to create a next-generation diesel fuel made from animal fat. With a lower input cost, this opportunity could be very valuable in light of rising fuel costs today. (For more, see Find Your Niche Market.)

Bottom Line
Darling is indeed a darling of investors today. The company is enjoying great growth in a stable industry that it virtually dominates. At current valuations, the share price likely reflects all the current optimism surrounding the company. (Learn the techniques that Buffett, Lynch and other pros used to make their fortunes. For more, see The Value Investor's Handbook.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  2. Investing News

    Are Stocks Cheap Now? Nope. And Here's Why

    Are stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
  3. Investing News

    4 Value Stocks Worth Your Immediate Attention

    Here are four stocks that offer good value and will likely outperform the majority of stocks throughout the broader market over the next several years.
  4. Investing News

    These 3 High-Quality Stocks Are Dividend Royalty

    Here are three resilient, dividend-paying companies that may mitigate some worry in an uncertain investing environment.
  5. Stock Analysis

    An Auto Stock Alternative to Ford and GM

    If you're not sure where Ford and General Motors are going, you might want to look at this auto investment option instead.
  6. Mutual Funds & ETFs

    The 4 Best Buy-and-Hold ETFs

    Explore detailed analyses of the top buy-and-hold exchange traded funds, and learn about their characteristics, statistics and suitability.
  7. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  8. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  9. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  10. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!