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.)

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