The great thing about writing for The Motley Fool is that I dig really deep to find stories worth writing about. That usually means unearthing some strange businesses, such as meat rendererDarling International
It makes and sells all kinds of candles. Scented. Jar. Votive. Pillars. And it sells a lot of them. It's not a huge company, though: Enterprise value is a modest $1.6 billion. Analysts expect earnings to grow at a rate of 16% per year for the next five years. The company generated $570 million in revenue this fiscal year. Do you have any idea just how many candles that is? Either it's putting something addictive in those scents or a lot of people just love candles.
Normally, I'd shy away from anything related to retail, but Yankee Candle gave me pause. Its overhead is a little different from other types of retailers. There aren't expensive products to produce. There's mostly just wax, and presumably a lot of it. That may help explain its extraordinary margins: 25% on the operating side and 15% for the bottom line. Management must like what it sees, because insiders own 42% of the stock. And although these Yankees carry $148 million in debt with only $11 million in cash, it generated $85 million in free cash flow in the past 12 months, so that debt load is not of great concern to me.
Small, unknown, boring, well-run companies often make for great investments. In the case of Yankee Candle, its stock has tripled over the past four years. That's perfect for the patient investor who doesn't want the heart palpitations caused by holding a Travelzoo
Investors looking to own a niche player that does a great job with its business should considering breathing in the fragrance of Yankee Candle while perusing its 10-K by candlelight.
Fool contributor Lawrence Meyers owns shares of Darling International and First Cash and likes to partake of an aperitif by candlelight but does not own shares of Yankee Candle.
