Here’s Why Murphy USA (NYSE:MUSA) Has Caught The Eye Of Investors
Here’s Why Murphy USA (NYSE:MUSA) Has Caught The Eye Of Investors
It’s common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, ‘Long shots almost never pay off.’ While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Murphy USA (NYSE:MUSA). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
Murphy USA’s Improving Profits
In the last three years Murphy USA’s earnings per share took off; so much so that it’s a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. In impressive fashion, Murphy USA’s EPS grew from US$11.23 to US$23.49, over the previous 12 months. Year on year growth of 109% is certainly a sight to behold. The best case scenario? That the business has hit a true inflection point.
It’s often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company’s growth. While we note Murphy USA achieved similar EBIT margins to last year, revenue grew by a solid 62% to US$19b. That’s a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don’t exist, you can check our visualization of consensus analyst forecasts for Murphy USA’s future EPS 100% free.
Are Murphy USA Insiders Aligned With All Shareholders?
Owing to the size of Murphy USA, we wouldn’t expect insiders to hold a significant proportion of the company. But thanks to their investment in the company, it’s pleasing to see that there are still incentives to align their actions with the shareholders. Notably, they have an enviable stake in the company, worth US$560m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company’s future.
Is Murphy USA Worth Keeping An Eye On?
Murphy USA’s earnings per share have been soaring, with growth rates sky high. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So at the surface level, Murphy USA is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. However, before you get too excited we’ve discovered 3 warning signs for Murphy USA (1 is concerning!) that you should be aware of.
The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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.
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About NYSE:MUSA
Murphy USA
Murphy USA Inc. engages in marketing of retail motor fuel products and convenience merchandise.
The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.
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