Tuesday, June 23, 2015

Seeking Alpha: Mueller Water Finally Looking More Like A Bargain

The housing recovery continues to develop at a slower pace than the bulls had hoped and that has weighed on the performance of Mueller Water Products (NYSE:MWA). I've had some reservations about this company's valuation and the likelihood that it would meet Street expectations over the past eighteen months, and during that time the shares have basically gone nowhere. While the company does appear to have resolved some of its manufacturing issues and municipal tendering activity has improved, weakness in the oil/gas sector has added a headwind and expectations for housing starts this year have moderated.

The sustained underperformance of these shares has given the fundamentals a chance to catch up and the risk-reward looks more interesting now than it has for most of the last two years. The weakness in metering is disappointing and the company is going to have to spend to support the growth potential of its leak detection business, but I think there's meaningful untapped profit/cash flow leverage remaining in the company's underutilized capacity. With the shares about 10% to 20% undervalued and still offering long-term recovery leverage, this name may be worth a closer look as other housing stories have already run further.

Read more here:
Mueller Water Finally Looking More Like A Bargain

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