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A recent spinoff that's cheap and growing

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April 24, 2014 – Comments (0) | RELATED TICKERS: MUSA

Murphy USA (MUSA) is the recent Murphy Oil spinoff that was inspired by Dan Loeb's activist position in the company. What we have here is a retail gas station chain that is both cheap and growing...a nice combination.

With approximately 1,200 locations right now, MUSA has another 22 currently under construction and has plans to build another 200 or so at or near Wal-Mart locations over the next three years. I like the tie in with a high-traffic retailer like Wal-Mart.

Trading at an EV/EBITDA multiple of around x5.2, a P/E multiple of around x9.6, and a free cash flow yield of 18.3% the company looks pretty cheap. Plus its former parent didn't load it up with debt before the spinoff, which is often the case. MUSA has a market cap of $1.8 billion and only $221 million in net debt with plenty of working capital.

There's tons of room for MUSA to raise its dividend in the future. Were it to use 30% of its free cash flow for dividends it would equate to a yield of 5.6% using the company's current share price.

Kudos to FNN31 for bringing a great ValueWalk article on the company to my attention.

Murphy USA: Spin-Off Gives Investors A Second Chance

 

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