Bath yourself in the waters of vanity..
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Friday, November 30, 2007
Wednesday, November 21, 2007
Dirty Sexy Money
No, I’m not talking about the new hit ABC show or for that matter the star Tripp Darling, Donald Sutherland. (Note: Donald Sutherland still puts the fear of god in me ever since his role as the delusional pyromaniac in Backdraft).
Two-4-the-Money sees some serious potential in another Darling, Darling International, Inc. (DAR). Darling provides rendering, recycling, and recovery solutions to the food industry primarily in the United States. It has two segments, Rendering and Restaurant Services. The Rendering segment engages in the collection and processing of animal by-products. It converts these products principally into useable oils and proteins utilized by the agricultural, leather, and oleo-chemical industries. The Restaurant Services segment involves in the collection of used cooking oils from food service establishments and recycling them into similar products, such as high-energy animal feed ingredients and industrial oils. It also provides grease trap collection services and sells equipment to restaurants.
Earlier this month Darling released their Q3 earnings to prior year data:
- Revenues were $171.8 million vs. $115.2 million. An increase of 49%.
- Selling, general & administrative expenses grew 15%.
- Income before taxes was $19.7 million vs. $2.5 million. An increase of 688%.
- Earnings Per Share of .15 vs. .02. An increase of 650%.
For the nine months ended September 20, 2007:
- Revenues were $469.9 million vs. $278.9 million in the prior year, advancing 68%.
- Selling, general & administrative expenses rose 21%.
- Pre-tax income was $50.7 million vs. a loss in the prior-year period of $1.9 million.
As the earnings numbers indicate this is a serious growth story. DAR closed the day at 17X 2007 earnings and 14X 2008 earnings, putting its price/sales at 1.33. The downside is its stock price has increased nearly 40% since its recent low in August. For fiscal year 2007, analysts estimate that DAR will earn $0.56. For the 3rd quarter of fiscal year 2007, DAR announced earnings per share of $0.15, representing 27% of the total annual estimate. So if DAR continues the EPS growth for Q4 of a conservative 400% for year over year (200% less than Q3 and YTD growth), Q4 would post a .28. Putting the fiscal year 2007 EPS at .67, betting the analyst estimates by roughly 20% and a 850% year over year. For fiscal year 2008, analysts estimate that DAR's earnings per share will grow by 27% to $0.71 based on previous estimates.
Additionally, as of October 24, 2007, Darling International Inc. moved from the AMEX to begin trading on the NYSE. This switch will increase Darling’s trading and brokerage coverage.
Other Considerations
On September 27, 2007, the Food and Drug Administration Amendments Act of 2007 (the Act) was signed into law as a result of Congressional concern for pet and livestock food safety, following the discovery of adulterated imported pet and livestock food in March 2007. The Act directs the Secretary of Health and Human Services (HHS) and the Food and Drug Administration (FDA) to promulgate significant new requirements for the pet food and animal feed industries. The impact of the Act on Darling is still up in the air until further clarification by the FDA. Based on some common sense assumption, one would expect for the Act to call for further requirements that would be inline with potential growth for Darling.
Upon listening to the Q3 press release, there was some talk of future acquisitions to further help Darling’s International growth. Currently, Darling receives 25% of its revenue from international markets (China, Europe, Canada and Mexico).
Secret weapon…
The hidden gem: the aftermath of deep fryers and restaurants' grease traps (aka - yellow grease). I’m not talking about Homer Simpson selling grease for extra cash. Experts predict that the US produces enough yellow grease annually to generate over 500 million gallons of biodiesel. Darling has already seen its alternative by-products increase significantly, with significantly more room to grow.
I leave you with a quote from Backdraft as an omen to Biodiesel consumption, when DeNiro’s character asks Donald Sutherland what he would like to do to the whole world:
“Burn it all. (Insert creepy Sutherland laugh here).”
Disclosure: Two-4-the-Money has a long position in DAR in several of their portfolios but positions can change any time.
Two-4-the-Money
Two-4-the-Money sees some serious potential in another Darling, Darling International, Inc. (DAR). Darling provides rendering, recycling, and recovery solutions to the food industry primarily in the United States. It has two segments, Rendering and Restaurant Services. The Rendering segment engages in the collection and processing of animal by-products. It converts these products principally into useable oils and proteins utilized by the agricultural, leather, and oleo-chemical industries. The Restaurant Services segment involves in the collection of used cooking oils from food service establishments and recycling them into similar products, such as high-energy animal feed ingredients and industrial oils. It also provides grease trap collection services and sells equipment to restaurants.
Earlier this month Darling released their Q3 earnings to prior year data:
- Revenues were $171.8 million vs. $115.2 million. An increase of 49%.
- Selling, general & administrative expenses grew 15%.
- Income before taxes was $19.7 million vs. $2.5 million. An increase of 688%.
- Earnings Per Share of .15 vs. .02. An increase of 650%.
For the nine months ended September 20, 2007:
- Revenues were $469.9 million vs. $278.9 million in the prior year, advancing 68%.
- Selling, general & administrative expenses rose 21%.
- Pre-tax income was $50.7 million vs. a loss in the prior-year period of $1.9 million.
As the earnings numbers indicate this is a serious growth story. DAR closed the day at 17X 2007 earnings and 14X 2008 earnings, putting its price/sales at 1.33. The downside is its stock price has increased nearly 40% since its recent low in August. For fiscal year 2007, analysts estimate that DAR will earn $0.56. For the 3rd quarter of fiscal year 2007, DAR announced earnings per share of $0.15, representing 27% of the total annual estimate. So if DAR continues the EPS growth for Q4 of a conservative 400% for year over year (200% less than Q3 and YTD growth), Q4 would post a .28. Putting the fiscal year 2007 EPS at .67, betting the analyst estimates by roughly 20% and a 850% year over year. For fiscal year 2008, analysts estimate that DAR's earnings per share will grow by 27% to $0.71 based on previous estimates.
Additionally, as of October 24, 2007, Darling International Inc. moved from the AMEX to begin trading on the NYSE. This switch will increase Darling’s trading and brokerage coverage.
Other Considerations
On September 27, 2007, the Food and Drug Administration Amendments Act of 2007 (the Act) was signed into law as a result of Congressional concern for pet and livestock food safety, following the discovery of adulterated imported pet and livestock food in March 2007. The Act directs the Secretary of Health and Human Services (HHS) and the Food and Drug Administration (FDA) to promulgate significant new requirements for the pet food and animal feed industries. The impact of the Act on Darling is still up in the air until further clarification by the FDA. Based on some common sense assumption, one would expect for the Act to call for further requirements that would be inline with potential growth for Darling.
Upon listening to the Q3 press release, there was some talk of future acquisitions to further help Darling’s International growth. Currently, Darling receives 25% of its revenue from international markets (China, Europe, Canada and Mexico).
Secret weapon…
The hidden gem: the aftermath of deep fryers and restaurants' grease traps (aka - yellow grease). I’m not talking about Homer Simpson selling grease for extra cash. Experts predict that the US produces enough yellow grease annually to generate over 500 million gallons of biodiesel. Darling has already seen its alternative by-products increase significantly, with significantly more room to grow.
I leave you with a quote from Backdraft as an omen to Biodiesel consumption, when DeNiro’s character asks Donald Sutherland what he would like to do to the whole world:
“Burn it all. (Insert creepy Sutherland laugh here).”
Disclosure: Two-4-the-Money has a long position in DAR in several of their portfolios but positions can change any time.
Two-4-the-Money
Tuesday, November 20, 2007
The Start
This is the first post of our new blog. We will mostly be discussing investments and sports as these are two of our favorite things. Gees, that sounded like a "Sounds of Music" reference. Anyways, we wanted to put our ideas out there to hopefully get some feedback and as a running diary of how good we are at making predictions about stocks and sports. We will have positions in many of the stocks we mention but we are by no means experts or even professionals. Just a couple of guys who love to see assets making assets. We do not bet on sports, and not because it's illegal, but because the funding of internet betting websites is illegal and we have run out of money. That might be an indication of how good we are at that activity. For example, the over/under on Cleveland Browns wins this season was 6. Now I, like many of you out there, thought there was no way the Browns would win more than 5 games, let alone 6. It was a no brainer of sorts. So I thought. Turns out they have already made it a push, and with their remaining schedule could win at least 4 more, if not the rest. Really, look at their schedule and tell me they can't win them all. I know its not probable, which is why i put them at 10 wins, but it is very possible. The combined record of their remaining opponents is 20-40, or something. Bottom line is if it seems like a no brainer, Vegas probably knows something you don't, so stay away. (Apparently someone in Vegas saw Joe Thomas block in preseason and thought he would be a rookie of the year candidate, helping the abysmal Browns o-line become one of the better units in the league. Who knew?)
Well that's it for now. My partner and I (nothing sexual) have been trying to start this blog thing for a while so there should be pretty regualr posts, at least at the beginning. Should have a couple more for you this week.
Two-4-the-Money
Well that's it for now. My partner and I (nothing sexual) have been trying to start this blog thing for a while so there should be pretty regualr posts, at least at the beginning. Should have a couple more for you this week.
Two-4-the-Money
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