A Closer Look at NewMarket (NEU) Valuation After Dividend Boost and Growth Moves Following Softer Q3 Results

NewMarket reported a dip in third-quarter revenue and profit, citing lower product shipments and higher costs. Alongside these results, the company increased its quarterly dividend and continued investing in new growth initiatives and operational improvements.

See our latest analysis for NewMarket.

Even with softer quarterly numbers and a recent pullback in the past month, NewMarket’s share price is still riding a powerful wave, boasting a 50.4% rise so far this year. Its three-year total shareholder return of 171% highlights sustained compounding gains. Recent buybacks and a higher dividend have reinforced investor confidence and helped keep momentum high.

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The latest numbers may show a slowdown, but strong capital returns and growth plans are still in play. Is NewMarket’s recent dip a rare buying opportunity, or is the market already factoring in its next chapter?

NewMarket is currently valued at a price-to-earnings (P/E) multiple of 16.2 times, slightly above peer averages. This puts the stock in the expensive bracket relative to similar companies at its recent close of $767.9.

The price-to-earnings ratio measures how much investors are willing to pay for each dollar of earnings. In the chemicals sector, it is a key valuation tool since profit margins tend to fluctuate and are tied to commodity cycles. A higher P/E can signal market optimism around future growth or earnings stability.

However, NewMarket’s P/E of 16.2x stands above the peer average (15.6x), suggesting the market is paying a premium compared to rivals. While this may be justified by factors such as consistent earnings or strategic initiatives, it places expectations on the company to sustain outperformance. In contrast, the stock looks notably cheap compared to the broader US Chemicals industry, which trades at an average P/E of 25.9x. This signals NewMarket may still be attractively priced within its wider sector even if it carries a slight premium versus direct peers.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price-to-Earnings of 16.2x (OVERVALUED)

However, slowing shipment growth and rising costs could put pressure on NewMarket’s earnings. This may present challenges for its premium valuation in the upcoming quarters.

Find out about the key risks to this NewMarket narrative.

But the SWS DCF model takes a much longer view and suggests something very different. According to this method, NewMarket is trading at a sharp discount of over 50% below its estimated fair value. If accurate, this signals substantial upside that the standard price-to-earnings ratio might overlook. Which method will prove right as market sentiment shifts?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out NewMarket for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 839 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.

If you think there’s more to the story or want to dig into the data yourself, you can easily craft your own take in just a few minutes. Do it your way

A great starting point for your NewMarket research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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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.

Companies discussed in this article include NEU.

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