Here's Why We Think Darling Ingredients (NYSE:DAR) Is Well Worth Watching

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Darling Ingredients (NYSE:DAR). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Darling Ingredients

Darling Ingredients' Improving Profits

Over the last three years, Darling Ingredients has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. To the delight of shareholders, Darling Ingredients' EPS soared from US$3.32 to US$4.60, over the last year. That's a commendable gain of 39%.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. EBIT margins for Darling Ingredients remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 37% to US$6.1b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Darling Ingredients?

Are Darling Ingredients Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$10b company like Darling Ingredients. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. We note that their impressive stake in the company is worth US$112m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Darling Ingredients, with market caps over US$8.0b, is about US$13m.

Darling Ingredients' CEO took home a total compensation package worth US$8.0m in the year leading up to January 2022. That comes in below the average for similar sized companies and seems pretty reasonable. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Darling Ingredients Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Darling Ingredients' strong EPS growth. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. Everyone has their own preferences when it comes to investing but it definitely makes Darling Ingredients look rather interesting indeed. You should always think about risks though. Case in point, we've spotted 2 warning signs for Darling Ingredients you should be aware of.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.