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Darling Ingredients Inc. (NYSE:DAR), which is in the food business, and is based in United States, saw its share price hover around a small range of $20.65 to $22.16 over the last few weeks. But is this actually reflective of the share value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Darling Ingredients’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Darling Ingredients worth?
Darling Ingredients is currently overpriced based on my relative valuation model. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Darling Ingredients’s ratio of 35.12x is above its peer average of 22.08x, which suggests the stock is overvalued compared to the Food industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Darling Ingredients’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Darling Ingredients generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 75% over the next couple of years, the future seems bright for Darling Ingredients. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? DAR’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe DAR should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on DAR for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for DAR, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Darling Ingredients. You can find everything you need to know about Darling Ingredients in the latest infographic research report. If you are no longer interested in Darling Ingredients, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.