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In December 2018, NewMarket Corporation (NYSE:NEU) released its most recent earnings announcement, which revealed that the business gained from a robust tailwind, leading to a double-digit earnings growth of 23%. Investors may find it useful to understand how market analysts view NewMarket's earnings growth trajectory over the next few years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Analysts' outlook for the coming year seems rather subdued, with earnings climbing by a single digit 3.6%. The growth outlook in the following year seems much more optimistic with rates arriving at double digit 10% compared to today’s earnings, and finally hitting US$279m by 2022.
While it is useful to understand the rate of growth each year relative to today’s level, it may be more valuable gauging the rate at which the company is growing on average every year. The advantage of this technique is that it ignores near term flucuations and accounts for the overarching direction of NewMarket's earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I've appended a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 5.8%. This means that, we can presume NewMarket will grow its earnings by 5.8% every year for the next few years.
For NewMarket, I've compiled three fundamental aspects you should further research:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is NEU worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether NEU is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of NEU? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.