Badger Meter (BMI) is a great example of why I say that valuation in and of itself isn’t really a driver of future performance – these shares have been “expensive” for a long time, and yet they’ve beaten the S&P for five years in a row (by double digits in three of those years) and generated an annualized average return of over 18% over the last decade, outperforming both the S&P 500 and its water sector peers.
Badger Meter is still expensive, but it also still has leading share in the almost-oligopolistic U.S. water meter market, a market where there is still meaningful growth potential in remote metering, and a growing technology suite that addresses water quality issues. I can’t make the numbers work on the basis of the growth and margins I expect, but Badger has good margins, good ROIC, healthy markets, growth opportunities, and strong ESG credentials, so I wouldn’t call it a promising short candidate either.
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Badger Meter - A Quality Water Name That Is Priced Accordingly
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