Darling Ingredients at $33.96: A High-Priced Bet on Renewable Fuels and Operational Turnaround?

Darling Ingredients (DAR) trades at $33.96 as of August 30, 2025, with a trailing P/E ratio of 52.25 and a market cap of $5.37 billion [4]. This valuation reflects a stock priced for optimism, given the company’s mixed financial performance and its strategic pivot toward renewable fuels and circular economy solutions. While the stock’s elevated P/E ratio raises questions about affordability, its operational transformation and industry tailwinds suggest a compelling case for long-term investors willing to navigate near-term volatility.

Financial Performance: A Tale of Two Segments

Darling’s Q2 2025 results underscored the duality of its business model. The Feed segment delivered robust performance, generating $135.9 million in adjusted EBITDA, driven by favorable pricing and stable raw material volumes [2]. This resilience contrasts sharply with the struggles of the Fuel segment, where Diamond Green Diesel (DGD)—its 50/50 renewable fuels joint venture—saw adjusted EBITDA plummet by 44% year-over-year to $42.6 million [1]. The decline stemmed from regulatory uncertainty, including delays in Renewable Identification Number (RIN) pricing and the transition from the blenders tax credit to the producer’s tax credit [4].

Despite these challenges, Darling’s balance sheet remains a bright spot. The company reduced net debt and achieved a leverage ratio of 3.34X as of June 28, 2025 [1]. Institutional ownership of 94.44% further signals confidence in its strategic direction [4].

Operational Transformation: From Waste to Value

Darling’s operational overhaul in 2025 is anchored in two pillars: renewable fuels and value-added protein products. The company’s DGD joint venture, a leading producer of renewable diesel and sustainable aviation fuel (SAF), sold 467.8 million gallons in H1 2025 at an average EBITDA of $0.22 per gallon [1]. With SAF plants operating at or near capacity and regulatory tailwinds like the 45Z tax credit extension to 2031, DGD’s margins are poised to recover [3].

Equally significant is Darling’s foray into the health and wellness market. The recent non-binding term sheet to form Nextida—a collagen and gelatin joint venture with Tessenderlo Group—highlights its ambition to monetize waste streams from animal agriculture into premium ingredients [1]. This move aligns with growing demand for plant-based and sustainable proteins, offering a new revenue stream beyond traditional waste management.

Industry Tailwinds and Regulatory Catalysts

The renewable fuels sector is undergoing a structural shift. U.S. policy developments, including the proposed Renewable Volume Obligation (RVO) of 5.25 billion gallons and Trump-era biofuel blending mandates, are expected to boost feedstock prices and demand for green diesel [1]. Darling’s CEO, Randall Stuewe, has emphasized that these changes position the company for stronger performance in H2 2025 and beyond [1].

However, risks persist. Small refinery exemptions (SREs) and overcapacity in the biofuel market could dampen demand, as evidenced by Darling’s revised 2025 EBITDA guidance of $1.05 billion to $1.1 billion [5]. Analysts remain divided, with a consensus price target of $47 (38% upside) but a wide range from $36 to $50 [2].

Valuation: High P/E, Low ROE, and a Debt-Neutral Balance Sheet

Darling’s P/E ratio of 51.76 [2] is well above the S&P 500 average, reflecting investor expectations for future growth. Yet its Return on Equity (ROE) of 2.45% [2] is underwhelming, suggesting limited shareholder returns. The Debt-to-Equity ratio of 0.90 [3] indicates moderate leverage, but refinancing risks could emerge if interest rates rise.

For the stock to justify its current valuation, Darling must deliver on its operational transformation. The success of DGD’s SAF business, the scalability of Nextida, and the company’s ability to navigate regulatory headwinds will be critical.

Conclusion: A Calculated Bet on the Future

Darling Ingredients at $33.96 is a high-risk, high-reward proposition. The stock’s valuation is stretched, but its strategic alignment with renewable fuels and circular economy trends offers asymmetric upside. Investors who can stomach near-term volatility—such as SRE-related demand fluctuations or RIN price swings—may find value in Darling’s long-term vision. As the company executes its transformation, the key question remains: Can it convert waste into wealth faster than its peers?

**Source:[1] Darling Ingredients Inc. Reports Second Quarter 2025 Results, [https://investors.darlingii.com/news/news-details/2025/Darling-Ingredients-Inc--Reports-Second-Quarter-2025-Results/default.aspx][2] Darling Ingredients (DAR) Financial Ratios, [https://stockanalysis.com/stocks/dar/financials/ratios/][3] Darling Ingredients at Global Farm to Market: Strategic Growth Amid Biofuel Changes, [https://www.investing.com/news/transcripts/darling-ingredients-at-global-farm-to-market-strategic-growth-amid-biofuel-changes-93CH-4045743][4] 309628 Shares in Darling Ingredients Inc. $DAR Acquired ..., [https://www.marketbeat.com/instant-alerts/filing-309628-shares-in-darling-ingredients-inc-dar-acquired-by-trexquant-investment-lp-2025-08-30/][5] Darling Ingredients Sets 2025 EBITDA Target at $1.05B-, [https://www.ainvest.com/news/darling-ingredients-sets-2025-ebitda-target-1-05b-1-1b-renewable-fuel-challenges-2507/]