$Darling Ingredients (DAR.US)$🎯 As of July 24, 2023, the cu...

New data: 2022Q3 and annual report, Q1 2023

In 2023, revenue increased significantly by 37.8%, but operating profit only grew by 30.8% due to a decline in gross margin. Net income only increased by 13.7% due to an increase in interest expenses. In 2022, interest expenses accounted for 18% of operating profit, which was a heavy burden.

By combining the balance sheet, it can be clearly seen that there was an acquisition in 2022, with goodwill and other intangible assets increasing by 1.22 billion, while long-term borrowings increased by 1.88 billion. This probably means that the company's acquisition was financed by debt, and the acquired company also has high liabilities, which is not a good sign.

In Q1 2023, revenue increased significantly by 31.1%, but operating profit only grew by 5% due to a decline in gross margin and a significant increase in expenses. Net income declined by 0.5% due to a significant increase in interest expenses. Interest expenses accounted for 29% of operating profit in Q1 2023, and the burden suddenly became very heavy.

The balance sheet shows that there was another acquisition in Q1 2023, with goodwill and other intangible assets increasing by 0.84 billion, reaching 3.679 billion, accounting for 89% of net assets of 4.122 billion. Long-term borrowings increased by 1.24 billion, reaching 4.559 billion, accounting for 111% of net assets. Considering the value of net assets, the leverage ratio is extremely high.

Due to recent investments, the accumulated operating cash flow has been lower than the investment cash flow for the past 5 years. The shareholder's surplus has been fully spent and is now in debt.

Currently, the P/E ratio is 15.2, which is not high compared to recent growth rates. However, considering that the source of the growth may be from acquisitions and the high leverage ratio and declining profit growth in the first quarter due to acquisitions, the current valuation can only be considered normal and lacks attractiveness. The position is currently unchanged, and further observation of several quarters is needed to make a judgment.