Darling Ingredients' Collagen Play: A $1.5B Bet on Health's Next Frontier

The health and wellness sector is no longer a niche market—it is the future of consumer demand. Nowhere is this clearer than in the collagen industry, projected to grow at a 9.8% CAGR through 2030. Into this boom steps Darling Ingredients (DAR), which has just sealed a $1.5 billion joint venture with Tessenderlo Group to dominate collagen production. This non-cash deal—85% owned by Darling—positions it to capitalize on a $20 billion opportunity, all while trading at a valuation that undervalues its near-term upside. Here’s why investors should act now.

The JV’s Strategic Genius: Scale, Control, and No Cash Burn

The newly formed Nextida™ venture combines Darling’s Rousselot collagen business with Tessenderlo’s PB Leiner division. The result? A global powerhouse with 23 facilities across four continents, 200,000 metric tons of annual production capacity, and 85% control under Darling’s purview. This structure delivers three critical advantages:

1. Zero upfront capital costs: The non-cash deal allows Darling to consolidate a $1.5B revenue stream without dilution or debt issuance—a rarity in M&A.
2. Operational dominance: By unifying 100+ global markets under one platform, Nextida eliminates redundancies and achieves economies of scale.
3. Product leadership: With 30% of global collagen production already under its belt, Darling now gains access to PB Leiner’s premium gelatin peptides, ideal for booming nutraceutical and pharmaceutical markets.

Analysts see this as a “no-brainer” bet. The consensus one-year price target of $50.32 implies a 47% upside from current levels, while GuruFocus’ $51.24 fair value estimate suggests 50%+ upside. Yet Darling trades at an EV/EBITDA of 11x—well below the 13.5x industry median—despite its superior growth trajectory.

Why the Undervaluation? And Why It Won’t Last

Despite Darling’s Q2 earnings stumble—a 180% EPS miss—the stock rose 6% post-announcement. This underscores the market’s belief that collagen is the real game-changer. Here’s why the current dip is a buying opportunity:

• Near-term catalysts: The JV’s 2026 close date is a clear inflection point. Once operational, synergies like shared R&D, streamlined logistics, and cross-selling will boost margins. Analysts project EBITDA could hit $1.3B by 2026, up from $0.835B today.
• Structural tailwinds: Collagen’s use in supplements, skincare, and functional foods is exploding. Darling’s vertical integration—from animal byproducts to finished collagen—gives it a cost advantage peers lack.
• Balance sheet resilience: With $1.27B in revolver availability and $81.5M cash, Darling can weather short-term volatility while executing its strategy.

Critics cite risks: regulatory delays, DGD’s underperformance, and macroeconomic headwinds. But these are near-term noise. The collagen market’s growth is secular—and Darling is now the clear leader.

Act Now: The Math of a 50% Upside

The numbers are compelling. At $34/share, Darling is priced for failure, not the $1.5B JV’s success. Consider:
- Analyst upside: 16 analysts rate it “Outperform” or higher; only one has a “Hold.”
- Synergy math: Even modest EBITDA growth to $1.25B (midpoint of guidance) would push the stock to $45–$50, aligning with its 2026 targets.
- Undervalued core business: Its Diamond Green Diesel JV alone delivers $129.5M in dividends annually—a cash flow engine untouched by the collagen boom.

This is a “buy the dip” moment. The stock’s May 2025 low of $27.63 was irrational panic over a single quarter’s miss. The fundamentals—collagen’s growth, JV synergies, and a fortress balance sheet—are all intact.

Conclusion: The Collagen Leader at a Bargain Price

Darling Ingredients is not just a play on a rising health trend—it is the best-positioned company to profit from it. With 85% control of a $1.5B JV, a low valuation, and a management team laser-focused on de-leveraging and buybacks, this is a stock primed to soar.

The risks are manageable. The upside is clear. Investors who act now will capture a 50% gain by 2026—and own a piece of the next great health revolution.

Action Item: Buy DAR at $34/share. Set a $50 target with a $25 stop-loss. This is a multi-year winner.

Disclosure: This analysis is based on public data as of May 2025. Always conduct your own research before investing.