Darling Ingredients Inc Stock Downgraded (DAR)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

NEW YORK ( TheStreet) -- Darling Ingredients (NYSE: DAR) has been downgraded by TheStreet Ratings from buy to hold. Among the primary strengths of the company is its robust revenue growth -- not just in the most recent periods but in previous quarters as well. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

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Highlights from the ratings report include:
  • DAR's very impressive revenue growth greatly exceeded the industry average of 3.6%. Since the same quarter one year prior, revenues leaped by 109.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • DARLING INGREDIENTS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, DARLING INGREDIENTS INC reported lower earnings of $0.90 versus $1.10 in the prior year. This year, the market expects an improvement in earnings ($1.02 versus $0.90).
  • In its most recent trading session, DAR has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • Net operating cash flow has significantly decreased to -$30.50 million or 151.28% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Food Products industry. The net income has significantly decreased by 262.9% when compared to the same quarter one year ago, falling from $32.41 million to -$52.80 million.

Darling Ingredients Inc. develops and produces natural ingredients from edible and inedible bio-nutrients worldwide. It offers a range ingredients and specialty products for customers in the pharmaceutical, food, pet food, feed, technical, fuel, bioenergy, and fertilizer industries. Darling Ingredients has a market cap of $3.21 billion and is part of the industrial goods sector and materials & construction industry. Shares are down 5.4% year to date as of the close of trading on Friday.

You can view the full Darling Ingredients Ratings Report or get investment ideas from our investment research center.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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