- If you are trying to figure out whether NewMarket's current share price fairly reflects its fundamentals, you are in the right place.
- The stock recently closed at US$584.66, after a 7 day return of an 8.8% decline, a 30 day return of a 16.2% decline, and a year to date return of a 15.0% decline, set against a 1 year return of 13.2%, a 3 year return of 78.2%, and a 5 year return of 66.4%.
- Recent coverage has focused on how NewMarket's share price performance over multiple time frames may reflect shifting sentiment around its long term prospects and risk profile. This context is helpful when you assess whether the current price lines up with the value suggested by different valuation methods.
- On our 6 point valuation framework, NewMarket scores 4 out of 6 checks for being potentially undervalued, as shown in our valuation score, and next we will compare the main valuation approaches before coming back at the end to an even richer way of thinking about what the stock might be worth.
Approach 1: NewMarket Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model estimates what a company might be worth by projecting its future cash flows and then discounting them back to today using a required rate of return. It is essentially asking what those future cash flows are worth in today's dollars.
For NewMarket, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is reported at about $508.1 million. Simply Wall St then projects free cash flow out to 2035, with estimates such as $510.3 million in 2026 and $646.5 million in 2035, based on modest annual growth assumptions. These future values are discounted back to today to account for time and risk.
Putting all of those discounted cash flows together gives an estimated intrinsic value of about $1,218.40 per share, compared with the recent share price of $584.66. That gap corresponds to an implied discount of about 52.0%, which suggests the shares currently trade well below this DCF estimate.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests NewMarket is undervalued by 52.0%. Track this in your watchlist or portfolio, or discover 48 more high quality undervalued stocks.
Approach 2: NewMarket Price vs Earnings
For a profitable company like NewMarket, the P/E ratio is a useful way to think about value because it tells you how much investors are currently paying for each dollar of earnings. It is a quick gauge of how the market prices the business relative to its profitability.
What counts as a "normal" or "fair" P/E usually reflects what investors expect for future growth and how much risk they see in the business. Higher expected growth or lower perceived risk often goes with a higher P/E, while lower growth expectations or higher risk tend to line up with a lower P/E.
NewMarket currently trades on a P/E of 13.17x. That sits well below the Chemicals industry average of about 28.18x and the peer group average of about 26.69x. Simply Wall St also uses a proprietary metric called the Fair Ratio, which estimates what P/E might make sense for NewMarket after accounting for its earnings growth profile, industry, profit margin, market cap and company specific risks. This Fair Ratio approach is more tailored than a simple peer or industry comparison because it adjusts for those fundamentals rather than assuming every company deserves the same multiple. Compared with this Fair Ratio, NewMarket's current P/E suggests the shares trade at a discount.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your NewMarket Narrative
Earlier we mentioned that there is an even better way to think about valuation, so let us introduce you to Narratives, which put a clear story behind your fair value, revenue, earnings and margin assumptions instead of leaving them as bare numbers in a spreadsheet.
A Narrative links three things in one place: your view of NewMarket as a business, the financial forecast that flows from that view, and the fair value you get when you compare that forecast with the current share price.
You can explore and create these Narratives on Simply Wall St's Community page, where many investors already use them to see whether their Fair Value suggests NewMarket is overpriced, underpriced or roughly in line with the current Price, and to decide whether that lines up with their own buy or sell thresholds.
Narratives update automatically when fresh information such as news or earnings is added to the platform. For NewMarket, you might see one Narrative that assumes a relatively cautious outlook and arrives at a lower fair value, while another assumes different prospects and supports a higher fair value, giving you a quick sense of how wide the range of views is.
Do you think there's more to the story for NewMarket? Head over to our Community to see what others are saying!
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.
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