Tuesday, June 10, 2008

A Penny Saved....

In the last post, there was a promise of recommendations for companies with products that save energy. Since this theme has already been at play in our selection criteria, we have several names in our coverage universe. We initiated coverage of Darling International, Inc. (DAR: NYSE) several months ago.

Darling International is a leading producer of rendered and recycled animal by-products such as useable oils and proteins. The Company also provides oil waste management services for the U.S. food industry. Rendering and recycling facilities are located throughout the U.S. and headquarters are based in Irving, Texas.

As an established processor of animal by-products Darling International is well positioned to participate in the building interest in recycling in general and waste-to-energy production in particular. Long-standing sourcing relationships with the meat production and restaurant industries throughout the country give Darling a national presence. A strong balance sheet and a solid track record in acquisitions also put Darling in a good position as a consolidator in the highly fragmented rendering and recycling sector. Management has also demonstrated their ability to build profitability even as materials and production costs have increased.

The price target for DAR shares is $19.60, reflecting a 20 times earnings multiple times our revised 2008 EPS estimate of $0.98. We continue to view the stock price as a bit ahead of fundamental developments, but suggest investors use any price pullback to accumulate more shares.

While Darling has not positioned itself as an energy savings player, we believe the company’s recycling business creates a net savings in energy that would otherwise go to a landfill.


Neither the author of the Small Cap Copy web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. Crystal Equity Research has a Buy rating on DAR shares.

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