When NewMarket Corporation (NYSE:NEU) announced its most recent earnings (30 September 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well NewMarket has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see NEU has performed. See our latest analysis for NewMarket
Commentary On NEU’s Past Performance
I like to use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This allows me to examine different companies on a more comparable basis, using the latest information. For NewMarket, its latest trailing-twelve-month earnings is $231.7M, which, in comparison to the prior year’s level, has declined by -7.77%. Since these figures are relatively nearsighted, I’ve estimated an annualized five-year figure for NewMarket’s net income, which stands at $231.6M. This means that even though earnings declined from the prior year, over the past couple of years, NewMarket’s earnings have been increasing on average.
How has it been able to do this? Let’s see whether it is merely a result of industry tailwinds, or if NewMarket has experienced some company-specific growth. Over the past couple of years, NewMarket increased bottom-line, while its top-line fell, by successfully managing its costs. This brought about to a margin expansion and profitability over time. Eyeballing growth from a sector-level, the US chemicals industry has been growing its average earnings by double-digit 13.71% in the prior year, and a less exciting 4.26% over the past five. This means any uplift the industry is benefiting from, NewMarket has not been able to leverage it as much as its industry peers.
What does this mean?
Though NewMarket’s past data is helpful, it is only one aspect of my investment thesis. Companies are profitable, but have unpredictable earnings, can have many factors impacting its business. You should continue to research NewMarket to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for NEU’s future growth? Take a look at our free research report of analyst consensus for NEU’s outlook.
2. Financial Health: Is NEU’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 September 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.