This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

A Little-Known Rebound Bet: Under the Radar

Stocks in this article: NEU LZ

RICHMOND, Va. ( TheStreet) --When investors think of companies that might benefit from an economic rebound, chemical maker NewMarket (NEU - Get Report) probably doesn't come to mind.

While demand for the company's petroleum and lubricant additives isn't directly tied to consumer spending, increased economic activity plays a major role in sales. As the economy recovers, Richmond, Va.-based NewMarket could see increased revenue that could expand the company's wide profit margins and make the stock a potentially profitable turnaround bet.

NewMarket shares are cheaper than those of peers, with a forward price-to-earnings ratio of 11 vs. an industry average of 35 and a S&P 500 average of 17. The company also trades at a discount based on estimated growth rates. A PEG ratio of just 0.65 places NewMarket well below the fair-priced level of 1. The company has delivered strong performance, with a return on equity above 36% and a gross margin of 34%, a 13% increase over the previous year.

NewMarket shares have more than tripled during the past year. The discounted valuation is even more impressive given the fast climb of the shares. The stock also offers a dividend yield of 1.4%, adding to already big returns.

As companies ramp up production, their machines will need more of NewMarket's lubricants. Increased shipping will increase petroleum demand, which would also add to sales. With about 60% of sales coming from overseas, NewMarket is positioned to capitalize on growth in emerging markets.

It's tempting to classify NewMarket as a green bet because some of its additives are used to increase engine efficiency, but this alone doesn't make the company a defender of the environment. If fact, costs related to site clean-up are a key issue for this company.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs