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

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  2. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  3. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  4. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  5. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  6. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
  7. Stock Analysis

    Why Alphabet is the Best of the 'FANGs' for 2016

    Alphabet just impressed the street, but is it the best FANG stock?
  8. Investing News

    A 2016 Outlook: What January 2009 Can Teach Us

    January 2009 and January 2016 were similar from an investment standpoint, but from a forward-looking perspective, they were very different.
  9. Mutual Funds & ETFs

    3 Vanguard Equity Fund Underperformers

    Discover three funds from Vanguard Group that consistently underperform their indexes. Learn how consistent most Vanguard low-fee funds are at matching their indexes.
  10. Investing News

    Alphabet Earnings Beat Expectations (GOOGL, AAPL)

    Alphabet's earnings crush analysts' expectations; now bigger than Apple?
RELATED FAQS
  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. 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 >>
  5. 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 >>
  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 >>
COMPANIES IN THIS ARTICLE
Trading Center