Over the past six months, Badger Meter’s shares (currently trading at $128.46) have posted a disappointing 18.2% loss, well below the S&P 500’s 11.2% gain. This might have investors contemplating their next move.
Following the drawdown, is this a buying opportunity for BMI? Find out in our full research report, it’s free.
Why Is Badger Meter a Good Business?
The developer of the world’s first frost-proof water meter in 1905, Badger Meter (NYSE:BMI) provides water control and measure equipment to various industries.
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, Badger Meter’s sales grew at an exceptional 13.6% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.
2. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Badger Meter’s EPS grew at 17.5% compounded annual growth rate over the last five years, higher than its 13.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Badger Meter has shown terrific cash profitability, putting it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the industrials sector, averaging 15.6% over the last five years.
Final Judgment
These are just a few reasons why we think Badger Meter is a great business. With the recent decline, the stock trades at 27.6× forward P/E (or $128.46 per share). Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
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