Darling Ingredients Inc. (NYSE:DAR), might not be a large cap stock, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$39.45 and falling to the lows of US$30.42. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Darling Ingredients' current trading price of US$31.49 reflective of the actual 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.
Is Darling Ingredients Still Cheap?
Darling Ingredients is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 47.27x is currently well-above the industry average of 20.47x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since Darling Ingredients’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
See our latest analysis for Darling Ingredients
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Darling Ingredients' earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
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 industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe DAR should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 an eye on DAR for a while, 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 optimistic prospect is encouraging for DAR, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you'd like to know more about Darling Ingredients as a business, it's important to be aware of any risks it's facing. Be aware that Darling Ingredients is showing 4 warning signs in our investment analysis and 1 of those makes us a bit uncomfortable...
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.