Advertisement
Singapore markets open in 5 hours 34 minutes

  • Straits Times Index

    3,415.51
    +47.61 (+1.41%)
     

  • S&P 500

    5,537.02
    +28.01 (+0.51%)
     

  • Dow

    39,308.00
    -23.85 (-0.06%)
     

  • Nasdaq

    18,188.30
    +159.54 (+0.88%)
     

  • Bitcoin USD

    59,898.79
    -2,096.87 (-3.38%)
     

  • CMC Crypto 200

    1,292.16
    -42.76 (-3.20%)
     

  • FTSE 100

    8,171.12
    +49.92 (+0.61%)
     

  • Gold

    2,369.40
    +36.00 (+1.54%)
     

  • Crude Oil

    83.88
    +1.07 (+1.29%)
     

  • 10-Yr Bond

    4.3550
    -0.0810 (-1.83%)
     

  • Nikkei

    40,580.76
    +506.07 (+1.26%)
     

  • Hang Seng

    17,978.57
    +209.43 (+1.18%)
     

  • FTSE Bursa Malaysia

    1,615.32
    +17.36 (+1.09%)
     

  • Jakarta Composite Index

    7,196.75
    -7,125.14 (-49.75%)
     

  • PSE Index

    6,450.03
    +91.07 (+1.43%)
     

NewMarket (NYSE:NEU) shareholders have earned a 20% CAGR over the last three years

editorial-team@simplywallst.com (Simply Wall St)
·3-min read

NewMarket Corporation (NYSE:NEU) shareholders might be concerned after seeing the share price drop 18% in the last quarter. But that shouldn't obscure the pleasing returns achieved by shareholders over the last three years. After all, the share price is up a market-beating 63% in that time.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

View our latest analysis for NewMarket

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

ADVERTISEMENT

During three years of share price growth, NewMarket achieved compound earnings per share growth of 21% per year. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 18% average annual increase in the share price. This observation indicates that the market's attitude to the business hasn't changed all that much. Rather, the share price has approximately tracked EPS growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
earnings-per-share-growth

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on NewMarket's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, NewMarket's TSR for the last 3 years was 75%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that NewMarket shareholders have received a total shareholder return of 27% over the last year. That's including the dividend. That's better than the annualised return of 7% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that NewMarket is showing 1 warning sign in our investment analysis , you should know about...

But note: NewMarket may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com