Today's IBD 50 Stocks To Watch pick — Darling Ingredients — is one of the top stocks to watch as it eyes a fresh buy point. Even so, DAR stock dropped nearly 4% midday Tuesday after the company announced a key acquisition.
Stocks To Watch: Darling Ingredients
The Texas-based company operates locations in North and South America, Europe, Asia and Australia. It develops and produces natural ingredients from edible and nonedible bio-nutrients.
On Tuesday, Darling announced it's buying Brazil's Gelnex, a collagen producer, for about $1.2 billion.
Medical, pharmaceutical, sports medicine and research companies use its biomedical gelatin products. The company also serves the biofuel, agriculture and food industries.
The food leader's adjusted Q2 earnings climbed just 5% to $1.23 per share, while sales jumped 38% to $1.65 billion vs. the year-ago period.
Q3 earnings are expected to grow to $1.43 per share on $1.63 billion in revenue. There is no confirmed earnings report date yet.
IBD Stock Ratings
DAR stock shows a solid 92 out of 99 Earnings Per Share Rating and a perfect "A" SMR grade, according to IBD Stock Checkup. The SMR Rating analyzes a company's sales, margins and return on equity, scaling results from "A" (the best) to "E" (the worst).
In 2021, pretax margins and return on equity measured 17% and 21%, respectively. Meanwhile, sales growth averaged 34% over the last four quarters.
This stock to watch boasts a perfect 99 IBD Composite Rating, tops within the Agricultural Operations industry group. The subsector ranks 40th out of 197 IBD groups, up from 121st place three weeks ago.
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Darling Stock Nears New Buy Point
Darling stock is building a cup-with-handle base with an 80.15 buy point, according to IBD MarketSmith pattern recognition.
The relative strength line hit a new high last week, confirming the stock is a market leader. A strong RS line in a weak market environment is a key technical indicator of strength.
Shares declined more than 3.5% Tuesday midday after the company agreed to acquire Brazilian collagen producer Gelnex for $1.2 billion in cash.
Wait for a decisive breakout above the entry before deciding whether to purchase shares. The market trend should also be in a confirmed uptrend, rather than the current market in correction.
Still, the stock's unusual strength is impressive during the ongoing market weakness, so this food leader is one of the top stocks to watch.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on top stocks to buy and watch and the stock market.
