Trade-Ideas: Darling Ingredients (DAR) Is Today's Strong On High Relative Volume Stock

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.

Trade-Ideas LLC identified Darling Ingredients ( DAR) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Darling Ingredients as such a stock due to the following factors:

  • DAR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $27.3 million.
  • DAR has traded 893,709 shares today.
  • DAR is trading at 9.64 times the normal volume for the stock at this time of day.
  • DAR is trading at a new high 10.01% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on DAR:

Darling Ingredients Inc. develops, produces, and sells natural ingredients from edible and inedible bio-nutrients worldwide. It operates in three segments: Feed Ingredients, Food Ingredients, and Fuel Ingredients. DAR has a PE ratio of 36. Currently there is 1 analyst that rates Darling Ingredients a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Darling Ingredients has been 2.5 million shares per day over the past 30 days. Darling Ingredients has a market cap of $2.3 billion and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 1.96 and a short float of 5.3% with 4.20 days to cover. Shares are down 23.2% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Darling Ingredients as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and increase in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • DAR's very impressive revenue growth greatly exceeded the industry average of 10.3%. Since the same quarter one year prior, revenues leaped by 133.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Food Products industry. The net income increased by 210.9% when compared to the same quarter one year prior, rising from $22.49 million to $69.94 million.
  • DARLING INGREDIENTS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DARLING INGREDIENTS INC reported lower earnings of $0.39 versus $0.90 in the prior year. This year, the market expects an improvement in earnings ($0.64 versus $0.39).
  • The gross profit margin for DARLING INGREDIENTS INC is rather low; currently it is at 20.59%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 6.99% trails that of the industry average.
  • DAR's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 29.93%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, DAR is still more expensive than most of the other companies in its industry.

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