Badger Meter: Smart Water Play At A Premium Price

seekingalpha06-07

Badger Meter is a premier water solutions provider, offering smart water offerings and digital technology for flow measurement and water quality inspection.The company has experienced solid growth, ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2441061669?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2132062090/image_2132062090.jpg","is_english":true,"pubTime":"2024-06-07 19:58","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2441061669","market":"nz","top_or_hot":-1,"title":"Badger Meter: Smart Water Play At A Premium Price","media":"seekingalpha","content":"<div>\n<p>Badger Meter is a premier water solutions provider, offering smart water offerings and digital technology for flow measurement and water quality inspection.The company has experienced solid growth, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4697993-badger-meter-smart-water-play-at-premium-price\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Badger Meter: Smart Water Play At A Premium Price</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nBadger Meter: Smart Water Play At A Premium Price\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-06-07 19:58 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4697993-badger-meter-smart-water-play-at-premium-price><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Badger Meter is a premier water solutions provider, offering smart water offerings and digital technology for flow measurement and water quality inspection.The company has experienced solid growth, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4697993-badger-meter-smart-water-play-at-premium-price\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BMI","symbol_name":"Badger Meter","start_time":0,"source_url":"https://seekingalpha.com/article/4697993-badger-meter-smart-water-play-at-premium-price","article_id":"2441061669","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2132062090/image_2132062090.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2441061669","pubTimestamp":1717761531,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Badger Meter is a premier water solutions provider, offering smart water offerings and digital technology for flow measurement and water quality inspection.The company has experienced solid growth, do","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BMI":"Badger Meter","BK4534":"瑞士信贷持仓","LU1721427968.SGD":"BNP PARIBAS AQUA \"CRH\" (SGDHDG) INC","BK4588":"碎股","IE00BD6J9T35.USD":"NEUBERGER BERMAN NEXT GENERATION MOBILITY \"A\" (USD) ACC","LU1543694498.USD":"法巴水资源基金RH MD Dis","LU1165135440.EUR":"BNP Paribas Aqua Classic Cap EUR","LU1992135472.HKD":"ALLIANZ GLOBAL INTELLIGENT CITIES \"AT\" (HKD) ACC","LU1992135399.USD":"Allianz Global Intelligent Cities AT Acc USD","BK4567":"ESG概念","TRMB":"天宝导航","LU2272731782.SGD":"Allianz Global Intelligent Cities AM Dis H2-SGD","BK4585":"ETF&股票定投概念","BK4157":"电子设备和仪器","LU2272731600.USD":"Allianz Global Intelligent Cities AM Dis USD"},"translate_title":"Badger Meter：超值智能玩水","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"BMI":1,"TRMB":1},"content_text":"Badger Meter is a premier water solutions provider, offering smart water offerings and digital technology for flow measurement and water quality inspection.The company has experienced solid growth, doubling its sales over the past decade while increasing operating margins.Despite its strong performance, the stock is currently trading at too demanding a valuation, making it not an ideal time to invest.Evgen_Prozhyrko/iStock via Getty Images Shares of Badger Meter (NYSE:BMI) have continued to do what they do best, rising in a steady fashion, as the premium water solutions business has long commanded a premium valuation, and rightfully so. That said, with the passage of time, this premium has gotten a bit higher, which makes that while I greatly appreciate the business and management, the same does not apply for the stock (at current levels). If and when shares might unexpectedly sell off, or show a prolonged period of stagnation, I am keen to pay a premium, in this very sound business, just not the kind of premium at which the stock trades today. Smart Water Solutions Badger Meter describes itself as a premier water solutions provider, offering a comprehensive suite of digital smart water offerings, relating to flow measurement, water quality inspection, measuring of water pressure and network monitoring, among others. The company was founded in the early 1900s and over time has grown to a current size of about three-quarters of a billion in revenues, with activities in over 50 countries, while employing a workforce of some 2,000. The prospects of the business are very good. Around the water theme, which include availability, preservation and quality, the solutions of Badger Meter fit right within the sweet spot of future demand, while many of its solutions focus on greater technology/digital adoption as well. A focus on innovation and bolt-on dealmaking, creates a very nice set-up for long-term growth, although that in the case of Badger Meter these positioning qualities have been (more than) well-recognized. The company estimates that the smart water market measures some $25 billion, with software being the largest component at nearly half the market size, complemented by actual sensors and monitors, meters, leak detectors, controls and irrigation, among others. Solid Growth Over the past decade, Badger Meter has doubled its business in terms of sales, having grown to a three-quarter of a billion sales base. The company has also successfully grown margins, with operating margins having increased from about 13% of sales a decade ago to about 17% today, providing an additional driver to earnings growth. All this growth has taken place while the company maintained the share base, not incurring any dilution in order to finance this growth, while balance sheet strength was maintained as well in the form of a sizeable net cash position. The fact that earnings per share have roughly tripled has translated into handsome returns (and some more) to investors. A $25 stock a decade ago has steadily risen to a high of $150 per share at the start of this year, now trading at $187 per share after hitting a high just over the $200 mark in recent weeks. Picking Up The Valuation Story Here In the first week of 2024, Badger Meter announced a bolt-on deal to acquire select remote water monitoring hardware and software from Trimble (TRMB). In particular, the transaction included the Telog brand of remote telemetry units and Trimble Unity remote watering software. Unfortunately, no financial details on the purchase price or contribution have been announced. Later that month, Badger posted a 24% increase in 2023 sales to $704 million, with software sales up 27% to $42 million. Earnings per share rose by 39% to $3.14 per share, equal to $92 million in dollar terms. With much of this growth achieved on an organic basis, it is an understatement to conclude that the company enjoyed solid operating momentum. A share count of 29.5 million shares translated into a $5.9 billion peak equity valuation based on recent highs of $200 per share, or $5.5 billion at a current price of $188 per share. This valuation included a $192 million net cash position, equal to $6.50 per share. The company was upbeat on the 2024 guidance, although it did not quantify the expected growth in sales and earnings at the time. This momentum clearly continues, as Badger posted an 18% increase in first quarter sales to $196 million, as GAAP earnings rose as much as 50% to $0.99 per share, all while cash holdings were stable around $200 million. With the company now firmly on track to generate $800 million in sales and posting earnings of around $4 per share, a $188 stock still trades at a demanding valuation (even if we back out net cash). This values the operations at around 45 times earnings here, with the company trading at around 7 times sales. On The Valuation The discussion above reveals the high valuation of the firm, but over time quality prevails over pricing. The truth is that current double digits organic growth numbers make it hard to argue with the potential of the business in the long haul and the prospects for the shares, but current multiples are simply quite demanding. Hence, now is not the time to chase shares here, but Badger certainly deserves real respect and a premium valuation, the question is just is how much. Given the solid net cash position, accompanied by real earnings power, the company has the financial footing to engage in continued bolt-on M&A to fuel organic growth. And while the company has always traded at premium valuations, this was a <$100 stock less than two years ago, showing that the extent of the premium valuations varies of time as well.  Given the perceived quality of the business, I would be happy to get involved at a 30 times earnings multiple here, as the quality over time should compound at a decent rate, but we are off a long way from such valuations. Nonetheless, Badger deserves are a premium, as I will be keen to keep a close eye on the shares in case of unexpected setbacks, which occasionally have happened in the past.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.24.2","shortVersion":"4.24.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2441061669"}