Pirmadienis, 20 gegužės, 2024
US Stocks

Murphy USA Inc. Stock Analysis

Murphy USA Inc. was founded on March 1, 2013, in Delaware, and through its subsidiaries, it manages assets and obligations of the former parent company Murphy Oil Corporation, which had a retail business in the United States, along with other assets and obligations of Murphy Oil that supported U.S. retail operations. Additionally, on January 29, 2021, the company acquired Quick Chek Corporation, a privately-owned chain of retail stores.

The company’s operations consist of a network of 1,733 retail fuel stations and convenience stores in 27 states, of which 1,157 operate under the Murphy brand and 156 operate as QuickChek stores.

Moreover, the company supplies fuel to wholesale customers through the company-owned and third-party product distribution terminals. It also transports petroleum products through its transportation lines. It has fuel trading points, small low-cost store formats and kiosks, as well as larger stores with a wider offering of food and beverages.

Most gas stations are strategically located in attractive places, near Walmart stores. It is believed that proximity generates a significant flow to existing Murphy retail locations. The Company collaborates with Walmart for fuel discount programs, especially the Walmart+ program, which enhances the attractiveness of customer offerings and strengthens both Murphy USA’s and Walmart’s competitive position.

Income by sector:

Income by sector
Income by sector

Finances

After a year, we can no longer say that the company is a good money generator. Although the main cash flows from operations are positive and cover all costs, the company’s annual revenue fell by as much as -8.17% in 2023. The 10-year average annual income growth has decreased to 1.76%. This is still good growth.

The Gross and Net Margins decreased by 6.03% and 2.59% respectively in 2023. However, the Cost portion in both Gross and Operating profits is below the threshold of a Intelligent investor. Therefore, we are interested in this company. The average asset return is as high as 13.16%, and the Equity return is almost 76%.

Inventory turnover is very low, and the cash turnover cycle is negative. These are very good indicators for the retail network. It does not stock what it brings, it sells it immediately. Hence, there are solid cash flows compensating for the Gross Profitability. The return on Retained profit decreased to 17.84%. This indicates Management shortcomings that emerged last year.

The company invests a lot into capital for its operations. One dollar invested into Long-Term Tangible Assets generates $1.75 of EPS. Money is being borrowed for investment, however, the costs of servicing the debt in Operating Income are low, and the coverage of Long-Term Debts with the Net Income of 2023 would be sufficient for just 0.31 years.

The F_Score indicator is 5. It is the lowest investment indicator and it has decreased over the year. However, there is an obvious trend of increasing costs, leading to decreasing Profitability indicators. The company sustains its operations through turnover.

To shareholders, the company is generous. The average annual growth of Retained profit reaches as much as 40.73%, with a profitability of 17.84%. Throughout 2023, the company returned nearly 66% of the year’s Net Profit to shareholders through Dividends and Share Buybacks.

If the company owners would like to sell shares and invest in 10-year US Treasury bonds while obtaining the same return as they did in 2023, then they should sell the shares at around 410 USD each. (Market price at the time of writing – 413 USD).

Investment Scoreboard:

Investment Scoreboard:
Investment Scoreboard:

Murphy USA Inc. shares

Murphy USA Inc.’s shares are being listed on the New York Stock Exchange, ticker is MUSA.

The company started paying dividends only in 2020. The average annual dividend growth rate was as high as 15.73%. However, the dividend yield still remains low. At the time of writing, it was 0.38%. This is because investors see that the company loves its shareholders, thus driving up its stock price.

In 2023, investors paid $17 for 1 (one) dollar of Free Cash Flow – the highest in the last 4 years, when the company’s profitability indicators were better. Therefore, the market evaluates the company’s performance adequately and with serious expectations.

The company’s stocks are not more risky than others. Although the beta is 0.77, the standard deviation (YoY) reaches 25%. On the other hand, such a stock in the portfolio can improve profitability indicators. The PEG is very attractive – 0.54. The equity risk premium at the time of writing is 1.62%.

The perspective of the price calculated by the GRAPES method is 990 USD. The perspective of the price calculated by our method is much more optimistic. At this pace, we can quickly expect a stock split as well. The historical stock price CAGR is 24%.

The Price Perspective
The Price Perspective

Price chart

Company’s site.

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