Investors will almost always pay up for growth. If you don't understand that, you'll never understand the trading in Middleby (NASDAQ:MIDD)
shares, nor large swaths of the market. This doesn't mean that
investors are always rational about what they'll pay for growth (if you
remember the tech bubble, you know what I mean), and there are plenty of
flame-out stories of stocks that carried steep multiples for five or
more years, only to double back down to reality. But the bottom line is
that growth draws investors like moths to flames.
I still like
this company quite a bit, and I believe there are still significant
growth/expansion opportunities in commercial foodservice (especially on
the cold side), food processing, and residential (on the cold side and
outdoor cooking). That said, while I don't think the valuation is crazy
and I do think that the company can continue to double the growth of the
underlying market, there's just not much breathing room left in the
valuation from my perspective.
Follow this link for more:
Middleby Demands A Stiff Price For Growth
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