Over the next 6 years, NewMarket shares will need to reach $1037 to achieve average annual stock market performance of 9.0%. Upper quartile performance will require a $1220 NewMarket stock price by 2029. At the current price of $618, what are market expectations regarding NewMarket’s future operating performance?
Executive Summary
- Price Target Research identifies NewMarket as having: very high profitability, above average expected growth, above average financial strength, and stability. A big positive influence on NewMarket’s valuation is its superior Growth.
- Low valuation, leading shareholder returns. Current valuation levels are below average relative to the NewMarket Peer Group. Recent market returns have significantly outperformed the NewMarket Peer Group. Total shareholder returns expected to seriously lag the overall equity market. Based on current investor expectations, NewMarket shares should reach a level of $799 by 2029 — an 6.0% per year total shareholder return. A 2029 stock price of $1037 would reflect median performance and a price of $1220 would be required to reach upper quartile performance.
- Growth has been NewMarket’s biggest valuation strength. Historical growth has been very high relative to the NewMarket Peer Group and forecasted growth is relatively high. Equity Growth, EPS Growth, and Revenue Growth have been superior. These factors have buoyed market perceptions of NewMarket. NewMarket’s historical income statement growth has been in line with balance sheet growth. Revenue growth has paralleled asset growth; earnings growth has paralleled equity growth and return on equity has been stable.
- Return on Equity, Pretax Margin, and Pretax ROA are group leading. These factors have strengthened market perceptions of NewMarket. The company has high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
- NewMarket’s risk profile is neutral. Overall variability has been above average with above average revenue variability, above average E.P.S. variability, and relatively low stock price volatility. Financial Strength is relatively high and earnings’ expectations are unavailable. The debt/capital ratio has declined very significantly.
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