DARLING INGREDIENTS INC. (DAR): what the price assumes

In the published model solve dated 2026-Q2, anchored at $57.78, DARLING INGREDIENTS INC. (DAR) is priced for +20.4% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-08-10 · Exported: 2026-08-12 · Source: https://boothcheck.com/report/DAR

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 9.1% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.4pp.

How unusual the bet is: within-range

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.6%); the inversion above states its own rate.

Per-Model Detail (n=15)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

• Darling turns animal by-products and used cooking oil into fats, proteins and food ingredients, and roughly a quarter of its market value sits in one half-owned renewable diesel venture whose earnings swung from a $30.5 million loss to a $107.4 million profit in a single quarter.
• The defining risk is policy rather than operations: Fuel Ingredients segment operating income fell to $3.4 million in fiscal 2025, a decrease of $193.8 million or 98.3%, after the United States switched from a blenders tax credit to a producers tax credit.
• Net borrowings run near ten times operating profit with interest covered less than twice over, which makes the second-quarter print due July 30, 2026 matter more for the debt path than for the earnings headline.

Bull Case

The most informative thing about this balance sheet is what management did not have to do with it. In fiscal 2025 one of the three segments went to almost nothing: Fuel Ingredients operating income, which carries the company's half of its renewable diesel venture, came in at $3.4 million, down $193.8 million or 98.3% on the year. A hole that size at a levered company usually produces an equity raise, a covenant amendment, or both. Neither happened. Interest expense went the other way, falling to $222.3 million in fiscal 2025 from $253.9 million a year earlier as borrowings came down. The company kept buying its own stock through the worst of it, 1,042,253 shares for about $34.7 million, leaving roughly 460.3 million dollars of the authorization unspent.

What absorbed the blow is the part of the business nobody writes about. Feed Ingredients produced $215.2 million of segment operating income and Food Ingredients $151.8 million, the latter up $7.1 million or 4.9% on higher volumes. This is rendering: collecting by-products from meat processors and used cooking oil from restaurants, then converting them into fats, proteins and gelatin. It is unglamorous, it prices off commodity spreads, and it is the reason a near-total collapse in the fuel line stayed an earnings event rather than becoming a solvency one.

Then the fuel line turned, and it turned hard. In the quarter ended April 4, 2026, equity in net income of Diamond Green Diesel was $107.4 million against a $30.5 million loss in the same quarter a year earlier, carrying total operating income to $226.8 million from $28.4 million. Net sales reached $1,550.8 million against $1,380.6 million, and sales to the venture itself, which buys Darling's fats as feedstock, ran $248.7 million against $218.0 million. The structure that makes the fuel line so violent on the way down works identically on the way back.

That structure is the actual bull case, and it hides in plain sight because the venture is carried as an investment rather than consolidated line by line. Darling collects the feedstock, sells a large share of it to a plant it half owns, and then books half of what that plant earns converting it. The 10-K describes the venture as formed to convert animal fats, recycled greases, used cooking oil, inedible corn oil, soybean oil, or other feedstocks into fuel. Very few companies own both ends of that chain. When the spread between waste fats and renewable diesel widens, this one gets paid on the raw material and then paid again on the conversion.

Bear Case

Line the valuation approaches up and they disagree, and the disagreement is the whole argument. The ones that reach today's price are the ones that project cash flows forward and credit growth for getting there. The ones that value the business on what it has already earned do not reach it: the price sits roughly 70% above where the earnings-power approaches land, and further above the book-value approaches than that. Peer multiples come closest and still sit under the price. When the only lenses that support a number are the lenses extrapolating forward, the price is a bet on durability, and the conservative lenses tend to be the more honest read of a company whose earnings just demonstrated they are not durable.

The evidence sits in the company's own account of fiscal 2025. Fuel Ingredients operating income fell 98.3% to $3.4 million, and the 10-K attributes it to an industry that experienced a significant change in the regulatory environment including issues related to the change from the blenders tax credit (BTC) to the producers tax credit (PTC) in the United States and tariffs on imported feedstocks, leading to a reduction in incentives and a decrease in margins. It goes on to note that the market mechanisms designed to counterbalance these challenges, including RINs, created through the RFS and state LCFS programs have been slow to react. None of that describes an operating failure. All of it sits outside management's control, and none of the underlying policy has since become more predictable.

Set against that, what the price asks for is not modest. It requires operating profit to compound at the fastest rate the business could fund out of its own cash flow, and to hold that rate for roughly six years. Of the companies that have grown that quickly, only about a third sustained it that long. The multiple this price implies sits at the very top of its peer distribution, well past the upper quartile rather than anywhere near the middle of it. A top-of-range multiple attached to a six-year run at full pace is the specific combination the bear is pointing at, and last fiscal year is the reason it is worth pointing at.

The balance sheet does not leave much space for a second bad year. Net borrowings run about ten times operating profit, and operating profit covered interest less than twice over across the trailing period. That interest was $222.3 million in fiscal 2025, a fixed claim sitting against an earnings stream that just proved it can drop by nearly $200 million inside twelve months. The 10-K is blunt about where the exposure lives, stating that The DGD Joint Venture subjects us to a number of risks and that the company's share of it rests on our equity in net income of the DGD Joint Venture, which is based on our 50% interest. The offsetting fact is real: roughly 2.4 billion dollars of value sits in equity stakes held outside the operating business, about a quarter of the market capitalization, and that bounds how far this can fall. It bounds the downside; it does not make the fuel line predictable.

Valuation

Today's price asks the business to grow operating profit at the fastest rate it could fund internally and to keep that up for roughly six years. That is the assumption sitting inside the quote. Of the companies that have grown at that pace, only about a third held it for that long, and the multiple implied here sits at the very top of its peer distribution rather than in the middle of it. The read is sensitive to the discount rate: a single percentage point on the cost of capital moves the required run by about a year and a half, so six years is the shape of the assumption, not a measurement of it.

The methods arrange themselves the way they usually do around a price like that. Approaches that discount future cash flows reach it. Approaches that capitalize what has already been earned do not, with the price sitting about 70% above where the earnings-power methods land. Peer multiples land nearest, just below. The book-value approaches land furthest away, which for a company carrying $30.28 of equity per share is arithmetic rather than opinion, since the shares change hands for roughly twice that. The distance between those families is the premium being paid for what happens next in renewable fuels, and nothing else.

Which input decides who is right is not in dispute. Darling holds a 50% interest in Diamond Green Diesel alongside Valero, and its share of that venture's results runs through the income statement above the operating line rather than below it, so the venture moves the operating number directly. In fiscal 2025 that contribution went to essentially nothing, taking Fuel Ingredients segment operating income to $3.4 million, a fall of 98.3%. In the quarter ended April 4, 2026 it came back, reaching $107.4 million against a $30.5 million loss, lifting operating income to $226.8 million from $28.4 million. Two consecutive readings that far apart are not noise around a trend. For this company they are the trend.

Solvency is where the volatility gets expensive. Net borrowings sit at about ten times operating profit and the trailing period covered interest less than twice over, though interest expense itself has been falling, to $222.3 million in fiscal 2025 from $253.9 million. Roughly 2.4 billion dollars of value sits in stakes held outside the operating business, about a quarter of the market capitalization, which puts a boundary under the downside. It does not make the fuel line steady, and the fuel line is what sets the price.

Catalysts

Second-quarter results arrive July 30, 2026, and the setup for them is unusual. The March quarter, reported April 30, 2026, was the inflection: equity in net income of Diamond Green Diesel of $107.4 million against a $30.5 million loss a year earlier, total operating income of $226.8 million against $28.4 million, and net sales of $1,550.8 million against $1,380.6 million. One quarter does not establish that the producers-credit regime works for this business the way the blenders credit did. Two consecutive quarters would start to.

The company laid out its own version of what comes next at an investor day on May 11, 2026, with the presentation furnished to the SEC that day, pointing at renewable fuels and collagen as the two places growth is meant to come from. The collagen side produced a dated item shortly after: on June 2, 2026 the Rousselot health brand announced a US patent covering Nextida GC, a collagen peptide composition aimed at blood glucose regulation. That is a small item against a company this size, and it is the kind of item that decides whether the food ingredients line grows at commodity rates or better.

One near-term decision is scheduled rather than speculative. The repurchase authorization, refreshed on June 21, 2024 at $500.0 million, runs to August 13, 2026 with roughly 460.3 million dollars unused, and no shares were bought under it in the fourth quarter of fiscal 2025. With the fuel line recovering and the expiry weeks away, whether that capacity gets used, extended, or allowed to lapse is a direct statement about where management thinks the balance sheet should be pointed.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• CHD (CHURCH & DWIGHT CO., INC.)
• FY2025 10-K: …in a reportable segment. Commercial & Professional We also provide a line of cleaning and deodorizing products for use in commercial and industrial applications such as office buildings, hotels, restaurants and other facilities. 6 COMPETITION We compete in the household and personal care consumer product categories,…
• FY2025 10-K: …in turn, our net sales and results of operations. Consumer preferences are also influenced by the perception of our brand images or those of our products, the success of advertising and marketing campaigns, our ability to engage with consumers in the manner they prefer, including through the use of digital media or…
• DDS (DILLARD’S, INC.)
• FY2025 10-K: …percentage ​ ​ 41.0 % ​ 4.7 % ​ 39.5 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 3,453,795 ​ $ 77,259 ​ $ 3,531,054 ​ Capital expenditures ​ $ 104,311 ​ $ 241 ​ $ 104,552 ​ ​ (a) The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating…
• FY2025 10-K: …assets (d) The calculation of gross margin is Net sales from external customers less Cost of sales. ​ F-16 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal 2022 ​ (in thousands of dollars) ​ Retail Operations ​ Construction ​ Consolidated ​ Net sales from customers ​ $ 6,701,972 ​ $ 214,011 ​ $ 6,915,983 ​…
• LW (Lamb Weston Holdings, Inc.)
• FY2025 10-K: …products, is highly competitive. Competitors include large North American and European frozen potato product companies that compete globally, local and regional companies, and retailers and foodservice distributors with their own branded and private label products. Some of our competitors are larger and have…
• FY2025 10-K: …by leveraging our production capabilities in other regions could negatively impact our ability to meet existing customers' needs and new customer opportunities and could decrease our profitability. See also "- Legal and Regulatory Risks - Climate change, or legal, regulatory, or market measures to address climate…
• CLX (CLOROX CO /DE/)
• FY2025 10-K: No other customers accounted for 10% or more of the Company's consolidated net sales in any of these fiscal years. The Company's five largest customers accounted for nearly half of the Company's consolidated net sales for each of the fiscal years 2025, 2024 and 2023. Competition The markets for consumer products are…
• FY2025 10-K: …of the Company's reportable segments. The Company's five largest customers accounted for nearly half of the Company's consolidated net sales for each of the fiscal years 2025, 2024, and 2023, and a significant portion of the Company's future revenues may continue to be derived from a small number of customers. As a…
• COTY (COTY INC.)
• FY2025 10-K: …of $483.7 in fiscal 2023. Operating margin improved to 15.1% of net revenues in fiscal 2024 as compared to 14.1% in fiscal 2023, driven primarily by lower amortization expense as a percentage of net revenues (approximately 40 basis points), lower cost of sales as a percentage of net revenues (approximately 40 basis…
• FY2025 10-K: …fiscal 2026 and beyond, we believe that our prestige fragrances are strategically positioned to achieve sustained growth and strong momentum across key markets. Within our Consumer Beauty segment, we are planning exciting new fragrance launches and strategic retail partnerships, expanding our mass fragrance presence…
• PSMT (PriceSmart, Inc.)
• FY2025 10-K: …retailers, including Walmart Inc. in Central America and Grupo Éxito in Colombia and Cencosud in South America. We have noted that certain retailers are making investments in upgrading their locations or opening new stores which may result in increased competition. Further, it is possible that other warehouse club…
• FY2025 10-K: …the Company revises the measurement of each segment's operating income and net income, including certain corporate overhead allocations, and other measures as determined by the information regularly reviewed by management. When the Company does so, the previous period amounts and balances are reclassified to conform…
• INGR (INGREDION INCORPORATED)
• FY2025 10-K: …12 Table of Contents Our ability to expand our business may suffer if we do not keep pace with technological developments and continue to offer innovative products, including more sustainable production methods. A significant portion of our growth depends on innovation in products, processes and services. Our R&D…
• FY2025 10-K: 00 % No customer or group of related customers accounted for 10 percent or more of our net sales in 2025, 2024 or 2023. Customer Contracts Some of our customer contracts provide for spot sales, while others are fee-based and adjust our selling prices based upon raw material input costs. Longer term customer contracts,…
• MKC (McCORMICK & COMPANY, INCORPORATED)
• FY2025 10-K: …to manage segment performance and allocate resources across segments and considers variances of actual performance to our annual budget and periodic forecasts as well as year over year performance when making decisions. Special charges and transaction and integration expenses are excluded from operating income in our…
• FY2025 10-K: …may generate adverse publicity that could damage our reputation or brands. Customer consolidation, consumer behaviors, and competitive, economic and other pressures facing our customers, may impact our financial condition or results of operations. A number of our customers, such as supermarkets, warehouse clubs and…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.