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.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV