Monday's IBD 50 Stocks To Watch pick is among top renewable energy stocks in today's market. Darling Ingredients, a company that turns waste and bugs into feed and fuel products, reported earnings on Feb. 28. Since then, the stock has set up a new base and is trading near the proper buy point.
The Irving, Texas-based company uses larvae to produce oil, animal feed and other products. Darling also converts recycled animal fats and oils used in cooking into feed and fuel ingredients, such as biodiesel. Even residual bakery products can be turned into ingredients. What's more, the company also acts as an environmental cleanup provider, with grease collection and disposal for food service firms.
The renewable energy stock is one of several food companies gaining favor as the market downtrend has investors turning toward more defensive industries. Shares have formed a cup-with-handle base in recent months, according to MarketSmith. The base shows an 80.31 entry, just 10 cents above the handle's high on March 3.
When building the right side of the base, shares rose in heavier-than-normal volume for several days in a row. It's often a positive sign when volume runs much higher on the upside. Meanwhile, the handle shakeout formed in much lighter volume, which is exactly the type of action investors want to see leading up to a breakout.
Currently, shares remain 8% away from the buy point. Additionally, the stock's moving averages began rising again after the company reported Q4 earnings in late Feb. Since reclaiming the 200-day line, shares have remained above the 50-day and 21-day lines, a bullish indicators.
Renewable Energy Stocks To Watch: Darling Ingredients
Darling Ingredients is a leader in the agricultural operations industry group, which ranks No. 34 of the 197 groups IBD measures in terms of six-month relative price performance. The stock, with its 98 Composite Rating, ranks highest in the group by that metric.
The renewable energy company's fourth-quarter earnings showed "another record year for Darling Ingredients," according to CEO Randall C. Stuewe in a recent earnings statement. "Robust demand in our feed segment aligned with increasing demand at Diamond Green Diesel (DGD) positions us well for strong performance in 2022."
In December, Darling announced it would buy Valley Proteins, a major rendering and used-cooking-oils facility, for $1.1 billion cash. "In the evolving world of ESG and global decarbonization, Valley Proteins will supplement Darling's global supply of waste fats and greases. The new supply will now provide Darling with additional low carbon feedstock to produce renewable diesel and potentially sustainable aviation fuel," said Stuewe in a news release.
In terms of fundamentals, Darling reported 109% earnings growth in the fourth quarter of 2021 vs. a year ago to 94 cents per share. In the prior four periods, the renewable energy stock's EPS reversed from a 51% drop in Q4 2020 to growth of 76%, 200% and 44%. Last quarter its top line grew 28% to $1.31 billion. This marked Darling's fifth quarter in a row of double-digit sales growth.
