NewMarket Corporation (NYSE:NEU), a chemicals company based in United States, had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of $381.23 to $403.63. However, is this the true valuation level of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at NewMarket’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View our latest analysis for NewMarket
Is NewMarket still cheap?
According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 20.32x is currently trading slightly below its industry peers’ ratio of 21.21x, which means if you buy NewMarket today, you’d be paying a reasonable price for it. And if you believe NewMarket should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. In addition to this, it seems like NewMarket’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What does the future of NewMarket look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 27.18% over the next couple of years, the future seems bright for NewMarket. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in NewMarket’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at NewMarket? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on NewMarket, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for NewMarket, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on NewMarket. You can find everything you need to know about NewMarket in the latest infographic research report. If you are no longer interested in NewMarket, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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.