NewMarket Corp. – Value Analysis (NYSE:NEU) : August 4, 2017

Capitalcube gives NewMarket Corp. a score of 84.

Our analysis is based on comparing NewMarket Corp. with the following peers – Innospec Inc., Gevo, Inc., Royal Dutch Shell Plc Sponsored ADR Class A, Exxon Mobil Corporation, Trecora Resources, Chevron Corporation and Sino United Worldwide Consolidated Ltd (IOSP-US, GEVO-US, RDS.A-US, XOM-US, TREC-US, CVX-US and SUIC-US).

Investment Outlook

NewMarket Corp. has a fundamental score of 84 and has a relative valuation of OVERVALUED.

Fundamental Score

Access our research and ratings on NewMarket Corp.

Company Overview

  • Considering peers, relative outperformance over the last year and the last month suggest a leading position.
  • It currently trades at a Price/Book ratio of (10.26).
  • NEU-US‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • NEU-US has a successful operating model with relatively high net profit margins and asset turns.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • NEU-US‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.
  • NEU-US‘s revenue growth in recent years and current P/E ratio are both around their respective peer medians suggesting that historical performance and long-term growth expectations for the company are largely in sync.
  • The company’s level of capital investment is relatively low and suggests it is milking the business.
  • NEU-US has the financial and operating capacity to borrow quickly.

Access our research and ratings on NewMarket Corp.

Leverage & Liquidity

NEU-US has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 10.51% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 15.69%), and a well-cushioned interest coverage level of 19.86x, NEU-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • All 7 peers for the company have an outstanding debt balance.

NEU-US has maintained its Quick & Able profile from the recent year-end.

  • NEU-US‘s interest coverage is downward trending and is below (but within one standard deviation of) its five-year average interest coverage of 24.57x.
  • While its interest coverage decreased to 19.86x from 21.61x (in 2016), its peer median increased during this period to 10.47x from 2.75x.
  • Interest coverage fell 9.47 points relative to peers.
  • NEU-US‘s debt-EV is greater than (but within one standard deviation of) its five-year average debt-EV of 9.07%.
  • While its debt-EV increased to 10.51% from 9.51% (in 2016), its peer median decreased during this period to 15.69% from 16.28%.
  • Relative to peers, debt-EV rose 1.59 percentage points.

Access the detailed analysis for NewMarket Corp.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Innospec Inc. 13.84 2.15 22.63 43.48
Gevo, Inc. 121.93 1.01 -3.95 -80.53
Royal Dutch Shell Plc Sponsored ADR Class A 47.66 1.24 3.36 38.71
Exxon Mobil Corporation 10.85 0.83 14.92 65.42
Trecora Resources 24.03 1.97 6.03 33.88
Chevron Corporation 17.54 0.93 1.52 39.49
Sino United Worldwide Consolidated Ltd 0.09 3.36 85.1 340.21
NewMarket Corporation 10.51 3.22 19.86 58.66
Peer Median 15.69 1.6 10.47 41.49
Best In Class 0.09 3.36 85.1 340.21

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Company Profile

NewMarket Corp. operates as a holding company, which through its subsidiaries Afton Chemical Corporation (Afton); Ethyl Corporation(Ethyl); NewMarket Services Corporation(NewMarket Services); and NewMarket Development Corporation engages in the provision of petroleum additives. Afton develops and manufactures highly formulated lubricant and fuel additive packages; as well as markets and sells these products worldwide. Ethyl comprises of the sale of tetraethyl lead. NewMarket Development manages properties owned in Virginia. NewMarket Services provides various administrative services.The company was founded on February 11, 1887 and is headquartered in Richmond, VA.

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