IBD 50 earnings growth play Murphy USA is forming a third-stage flat base with a buy point of 303.19. This elite list reflects exceptionally strong performance in recent quarters. All these components have high technical ratings, according to IBD Stock Check Up.
Murphy USA Price Action
MUSA stock's late-stage base is a potential buying opportunity but riskier than taking exposure in first or second-stage bases. IBD research tells us that 3rd-stage bases succeed just 67% of the time.
Shares broke out of a cup-with-handle base (first stage) above a buy point of 152.58 in August 2021, posting light volume.
They gained more than 30%, climbing to 202.20 and forming a new cup-with-handle (second stage base). This handle was less than ideal for the second time but trading volume was light.
Shares broke out again in March 2022, surging nearly 55% before topping out above 300 in August. They remain above their 50-day moving average and near 52-week highs as we head toward October.
Murphy ranks first in the Retail-Supermarket and Mini-Markets group, which holds the 6th position out of 197 IBD industry groups.
It has a perfect 99 Composite Rating and a high 97 Relative Strength Rating. Its relative strength line, which compares the stock's performance with the S&P 500, has been rising steadily since October 2021 and is at an all-time high.
It also boasts a perfect "A" SMR rating. This reflects strong sales growth and profit margins in recent quarters. The company's ability to pay back shareholders through dividends also underpins the high SMR rating.
Strong Sales and Earnings Growth
Murphy USA is a leading independent retailer of gasoline and convenience store products, with over 1650 locations.
The Arkansas-based retailer's low-cost fuel model drove strong earnings growth in the second quarter.
In June-ended Q2, it grew sales 52% to $6.7 billion while profits surged to $7.53 per-share, a 56% increase. Murphy also announced a 3% dividend increase to 32 cents per share during the earnings call, payable to shareholders of record on August 30, 2022.
More mutual funds have been buying the stock in the past four quarters, according to IBD MarketSmith. Several exchange-traded funds hold shares as well, including the iShares Core S&P Mid Cap ETF and the Vanguard Small Cap Index Fund
Growth stocks tend to outperform in strong markets. The current downturn means that investors should watch growth stocks, like Murphy, for signs of renewed leadership.
However, the stock's third stage base can quickly break down if the market's downtrend is too strong.
