Over the past six months, Badger Meter’s shares (currently trading at $192.38) have posted a disappointing 11% loss while the S&P 500 was flat. This may have investors wondering how to approach the situation.
Following the drawdown, is now the time to buy BMI? Find out in our full research report, it’s free.
Why Are We Positive On BMI?
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
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, Badger Meter’s 14.2% annualized revenue growth over the last five years was exceptional. 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 an astounding 21.2% compounded annual growth rate over the last five years, higher than its 14.2% 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 15.8% over the last five years.
Final Judgment
These are just a few reasons why we're bullish on Badger Meter. After the recent drawdown, the stock trades at 39.3× forward price-to-earnings (or $192.38 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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