Intrinsic value of Darling Ingredients Inc. - DAR

Previous Close

$21.29

  Intrinsic Value

$128.41

stock screener

  Rating & Target

str. buy

+503%

Previous close

$21.29

 
Intrinsic value

$128.41

 
Up/down potential

+503%

 
Rating

str. buy

We calculate the intrinsic value of DAR stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 3.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  3,456
  3,535
  3,626
  3,728
  3,841
  3,965
  4,100
  4,246
  4,404
  4,573
  4,754
  4,947
  5,152
  5,370
  5,602
  5,847
  6,107
  6,382
  6,673
  6,979
  7,303
  7,644
  8,003
  8,382
  8,781
  9,201
  9,644
  10,109
  10,599
  11,114
Variable operating expenses, $m
  117
  116
  114
  112
  110
  108
  105
  102
  99
  96
  -90
  -93
  -97
  -101
  -106
  -110
  -115
  -120
  -126
  -132
  -138
  -144
  -151
  -158
  -166
  -174
  -182
  -191
  -200
  -210
Fixed operating expenses, $m
  540
  551
  564
  576
  589
  602
  615
  628
  642
  656
  671
  686
  701
  716
  732
  748
  764
  781
  798
  816
  834
  852
  871
  890
  910
  930
  950
  971
  992
  1,014
Total operating expenses, $m
  657
  667
  678
  688
  699
  710
  720
  730
  741
  752
  581
  593
  604
  615
  626
  638
  649
  661
  672
  684
  696
  708
  720
  732
  744
  756
  768
  780
  792
  804
Operating income, $m
  2,799
  2,868
  2,948
  3,040
  3,142
  3,256
  3,380
  3,516
  3,662
  3,820
  4,173
  4,354
  4,549
  4,756
  4,976
  5,210
  5,458
  5,721
  6,000
  6,295
  6,606
  6,936
  7,283
  7,650
  8,037
  8,445
  8,875
  9,329
  9,806
  10,309
EBITDA, $m
  3,222
  3,297
  3,383
  3,482
  3,592
  3,714
  3,848
  3,994
  4,151
  4,321
  4,504
  4,699
  4,907
  5,130
  5,366
  5,617
  5,884
  6,166
  6,465
  6,781
  7,115
  7,468
  7,841
  8,234
  8,649
  9,086
  9,547
  10,033
  10,544
  11,083
Interest expense (income), $m
  82
  90
  93
  97
  100
  105
  109
  114
  120
  126
  133
  140
  147
  155
  164
  173
  183
  193
  204
  215
  227
  240
  254
  268
  283
  299
  315
  333
  351
  371
  391
Earnings before tax, $m
  2,708
  2,775
  2,852
  2,940
  3,038
  3,147
  3,266
  3,395
  3,536
  3,688
  4,033
  4,207
  4,393
  4,592
  4,803
  5,027
  5,265
  5,518
  5,785
  6,068
  6,366
  6,682
  7,016
  7,367
  7,739
  8,130
  8,543
  8,978
  9,436
  9,918
Tax expense, $m
  731
  749
  770
  794
  820
  850
  882
  917
  955
  996
  1,089
  1,136
  1,186
  1,240
  1,297
  1,357
  1,422
  1,490
  1,562
  1,638
  1,719
  1,804
  1,894
  1,989
  2,089
  2,195
  2,307
  2,424
  2,548
  2,678
Net income, $m
  1,977
  2,026
  2,082
  2,146
  2,218
  2,297
  2,384
  2,479
  2,581
  2,692
  2,944
  3,071
  3,207
  3,352
  3,506
  3,670
  3,844
  4,028
  4,223
  4,429
  4,647
  4,878
  5,121
  5,378
  5,649
  5,935
  6,236
  6,554
  6,888
  7,240

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  4,987
  5,101
  5,232
  5,380
  5,543
  5,722
  5,917
  6,127
  6,355
  6,599
  6,860
  7,138
  7,434
  7,749
  8,084
  8,438
  8,813
  9,209
  9,628
  10,071
  10,538
  11,030
  11,549
  12,096
  12,671
  13,278
  13,916
  14,587
  15,294
  16,037
Adjusted assets (=assets-cash), $m
  4,987
  5,101
  5,232
  5,380
  5,543
  5,722
  5,917
  6,127
  6,355
  6,599
  6,860
  7,138
  7,434
  7,749
  8,084
  8,438
  8,813
  9,209
  9,628
  10,071
  10,538
  11,030
  11,549
  12,096
  12,671
  13,278
  13,916
  14,587
  15,294
  16,037
Revenue / Adjusted assets
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
Average production assets, $m
  2,671
  2,733
  2,803
  2,882
  2,969
  3,065
  3,169
  3,282
  3,404
  3,535
  3,675
  3,824
  3,982
  4,151
  4,330
  4,520
  4,721
  4,933
  5,158
  5,395
  5,645
  5,909
  6,187
  6,479
  6,788
  7,113
  7,455
  7,814
  8,193
  8,591
Working capital, $m
  263
  269
  276
  283
  292
  301
  312
  323
  335
  348
  361
  376
  392
  408
  426
  444
  464
  485
  507
  530
  555
  581
  608
  637
  667
  699
  733
  768
  805
  845
Total debt, $m
  1,726
  1,787
  1,857
  1,936
  2,023
  2,119
  2,223
  2,336
  2,458
  2,588
  2,728
  2,877
  3,035
  3,204
  3,383
  3,572
  3,773
  3,985
  4,209
  4,446
  4,696
  4,959
  5,237
  5,529
  5,837
  6,162
  6,503
  6,862
  7,240
  7,638
Total liabilities, $m
  2,668
  2,729
  2,799
  2,878
  2,965
  3,061
  3,165
  3,278
  3,400
  3,530
  3,670
  3,819
  3,977
  4,146
  4,325
  4,514
  4,715
  4,927
  5,151
  5,388
  5,638
  5,901
  6,179
  6,471
  6,779
  7,104
  7,445
  7,804
  8,182
  8,580
Total equity, $m
  2,319
  2,372
  2,433
  2,502
  2,577
  2,661
  2,751
  2,849
  2,955
  3,068
  3,190
  3,319
  3,457
  3,603
  3,759
  3,924
  4,098
  4,282
  4,477
  4,683
  4,900
  5,129
  5,370
  5,624
  5,892
  6,174
  6,471
  6,783
  7,112
  7,457
Total liabilities and equity, $m
  4,987
  5,101
  5,232
  5,380
  5,542
  5,722
  5,916
  6,127
  6,355
  6,598
  6,860
  7,138
  7,434
  7,749
  8,084
  8,438
  8,813
  9,209
  9,628
  10,071
  10,538
  11,030
  11,549
  12,095
  12,671
  13,278
  13,916
  14,587
  15,294
  16,037
Debt-to-equity ratio
  0.740
  0.750
  0.760
  0.770
  0.790
  0.800
  0.810
  0.820
  0.830
  0.840
  0.860
  0.870
  0.880
  0.890
  0.900
  0.910
  0.920
  0.930
  0.940
  0.950
  0.960
  0.970
  0.980
  0.980
  0.990
  1.000
  1.000
  1.010
  1.020
  1.020
Adjusted equity ratio
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,977
  2,026
  2,082
  2,146
  2,218
  2,297
  2,384
  2,479
  2,581
  2,692
  2,944
  3,071
  3,207
  3,352
  3,506
  3,670
  3,844
  4,028
  4,223
  4,429
  4,647
  4,878
  5,121
  5,378
  5,649
  5,935
  6,236
  6,554
  6,888
  7,240
Depreciation, amort., depletion, $m
  423
  429
  435
  442
  450
  459
  468
  478
  489
  501
  331
  344
  359
  374
  390
  407
  425
  444
  465
  486
  509
  532
  557
  584
  612
  641
  672
  704
  738
  774
Funds from operations, $m
  2,400
  2,454
  2,517
  2,588
  2,668
  2,756
  2,852
  2,957
  3,070
  3,193
  3,275
  3,416
  3,566
  3,726
  3,896
  4,077
  4,269
  4,472
  4,688
  4,915
  5,156
  5,410
  5,679
  5,962
  6,261
  6,576
  6,908
  7,258
  7,626
  8,014
Change in working capital, $m
  5
  6
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  35
  37
  39
Cash from operations, $m
  2,395
  2,448
  2,510
  2,580
  2,659
  2,746
  2,842
  2,946
  3,059
  3,180
  3,261
  3,401
  3,550
  3,709
  3,879
  4,058
  4,249
  4,451
  4,666
  4,892
  5,131
  5,384
  5,651
  5,933
  6,230
  6,544
  6,874
  7,222
  7,589
  7,975
Maintenance CAPEX, $m
  -236
  -241
  -246
  -253
  -260
  -267
  -276
  -286
  -296
  -307
  -318
  -331
  -344
  -359
  -374
  -390
  -407
  -425
  -444
  -465
  -486
  -509
  -532
  -557
  -584
  -612
  -641
  -672
  -704
  -738
New CAPEX, $m
  -54
  -61
  -70
  -79
  -87
  -96
  -104
  -113
  -122
  -131
  -140
  -149
  -159
  -169
  -179
  -190
  -201
  -212
  -224
  -237
  -250
  -264
  -278
  -293
  -308
  -325
  -342
  -360
  -378
  -398
Cash from investing activities, $m
  -290
  -302
  -316
  -332
  -347
  -363
  -380
  -399
  -418
  -438
  -458
  -480
  -503
  -528
  -553
  -580
  -608
  -637
  -668
  -702
  -736
  -773
  -810
  -850
  -892
  -937
  -983
  -1,032
  -1,082
  -1,136
Free cash flow, $m
  2,106
  2,146
  2,194
  2,249
  2,312
  2,383
  2,461
  2,547
  2,641
  2,743
  2,803
  2,921
  3,047
  3,182
  3,326
  3,479
  3,641
  3,814
  3,997
  4,190
  4,395
  4,612
  4,841
  5,083
  5,338
  5,608
  5,892
  6,191
  6,506
  6,839
Issuance/(repayment) of debt, $m
  52
  61
  70
  79
  87
  96
  104
  113
  122
  130
  140
  149
  159
  169
  179
  190
  201
  212
  224
  237
  250
  263
  278
  293
  308
  324
  341
  359
  378
  398
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  52
  61
  70
  79
  87
  96
  104
  113
  122
  130
  140
  149
  159
  169
  179
  190
  201
  212
  224
  237
  250
  263
  278
  293
  308
  324
  341
  359
  378
  398
Total cash flow (excl. dividends), $m
  2,157
  2,207
  2,264
  2,328
  2,399
  2,479
  2,565
  2,660
  2,763
  2,873
  2,943
  3,070
  3,206
  3,350
  3,504
  3,668
  3,842
  4,026
  4,221
  4,427
  4,645
  4,875
  5,119
  5,375
  5,646
  5,932
  6,233
  6,550
  6,884
  7,236
Retained Cash Flow (-), $m
  -46
  -53
  -61
  -68
  -76
  -83
  -91
  -98
  -106
  -113
  -121
  -129
  -138
  -146
  -155
  -165
  -174
  -184
  -195
  -206
  -217
  -229
  -241
  -254
  -268
  -282
  -297
  -312
  -329
  -346
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  2,111
  2,154
  2,203
  2,259
  2,323
  2,395
  2,475
  2,562
  2,657
  2,760
  2,821
  2,940
  3,068
  3,204
  3,349
  3,503
  3,667
  3,841
  4,026
  4,221
  4,428
  4,647
  4,877
  5,121
  5,379
  5,650
  5,936
  6,238
  6,556
  6,891
Discount rate, %
  6.50
  6.83
  7.17
  7.52
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
PV of cash for distribution, $m
  1,982
  1,888
  1,790
  1,690
  1,589
  1,485
  1,379
  1,272
  1,164
  1,056
  933
  830
  730
  635
  545
  461
  384
  315
  254
  202
  157
  119
  89
  65
  46
  32
  22
  14
  9
  6
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Darling Ingredients Inc. (Darling) is a developer and producer of sustainable natural ingredients from edible and inedible bio-nutrients, creating a range of ingredients and customized specialty solutions for customers in the pharmaceutical, food, pet food, feed, industrial, fuel, bioenergy and fertilizer industries. The Company operates through three segments: Feed Ingredients, Food Ingredients and Fuel Ingredients. The Company collects and transforms all aspects of animal by-product streams into useable and specialty ingredients, such as gelatin, edible fats, feed-grade fats, animal proteins and meals, plasma, pet food ingredients, organic fertilizers, yellow grease, fuel feedstocks, green energy, natural casings and hides. In addition, the Company provides grease trap services to food service establishments, environmental services to food processors and sells restaurant cooking oil delivery and collection equipment.

FINANCIAL RATIOS  of  Darling Ingredients Inc. (DAR)

Valuation Ratios
P/E Ratio 34.4
Price to Sales 1
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 9
Price to Free Cash Flow 23.8
Growth Rates
Sales Growth Rate 0%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 4.3%
Cap. Spend. - 3 Yr. Gr. Rate 15.1%
Financial Strength
Quick Ratio 5
Current Ratio 0
LT Debt to Equity 87.6%
Total Debt to Equity 88.7%
Interest Coverage 3
Management Effectiveness
Return On Assets 3.7%
Ret/ On Assets - 3 Yr. Avg. 3.4%
Return On Total Capital 2.7%
Ret/ On T. Cap. - 3 Yr. Avg. 2.2%
Return On Equity 5.3%
Return On Equity - 3 Yr. Avg. 4.2%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 22.2%
Gross Margin - 3 Yr. Avg. 21.7%
EBITDA Margin 14.6%
EBITDA Margin - 3 Yr. Avg. 13.1%
Operating Margin 4.5%
Oper. Margin - 3 Yr. Avg. 4.3%
Pre-Tax Margin 3.6%
Pre-Tax Margin - 3 Yr. Avg. 2.9%
Net Profit Margin 3%
Net Profit Margin - 3 Yr. Avg. 2.3%
Effective Tax Rate 13%
Eff/ Tax Rate - 3 Yr. Avg. 14.4%
Payout Ratio 0%

DAR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DAR stock intrinsic value calculation we used $3388 million for the last fiscal year's total revenue generated by Darling Ingredients Inc.. The default revenue input number comes from 0001 income statement of Darling Ingredients Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our DAR stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6.5%, whose default value for DAR is calculated based on our internal credit rating of Darling Ingredients Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Darling Ingredients Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of DAR stock the variable cost ratio is equal to 3.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $528 million in the base year in the intrinsic value calculation for DAR stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Darling Ingredients Inc..

Corporate tax rate of 27% is the nominal tax rate for Darling Ingredients Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the DAR stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for DAR are equal to 77.3%.

Life of production assets of 11.1 years is the average useful life of capital assets used in Darling Ingredients Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for DAR is equal to 7.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $2273.048 million for Darling Ingredients Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 164.711 million for Darling Ingredients Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Darling Ingredients Inc. at the current share price and the inputted number of shares is $3.5 billion.

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