The markets have long loved water/fluid-management stories like Xylem (XYL), ITT (ITT), and Franklin Electric (FELE),
and if you can add a residential construction rebound, you have an even
better story in the making. That has certainly worked for Mueller Water (MWA),
as shares have risen more than 75% over the past year, 235% over the
past two years, and about 300% over the all-time low set in November of
2011.
Not surprisingly, it looks like the market has put a
definite premium on the recovery potential here. I do believe that
residential construction is on its way back, and I also believe that
Mueller's investment in advanced products like advanced metering (AMI),
leak detection, and pressure monitoring will provide a nice kicker to
its growth in valves and hydrants. Mueller shares do look pricey on a
cash flow basis, and could be vulnerable if the residential recovery
proves shallower than expected, but I won't ignore the possibility that
strong leverage could lead to significant profit growth and even higher
multiples.
Please click the link to read the full article:
Wall Street Betting That Mueller's Profits Will Start To Flow
No comments:
Post a Comment