Friday, 18 October 2024
by BD Banks
Shares of leading water solutions provider Badger Meter (NYSE: BMI) plunged 9% as of 12:30 p.m. ET Thursday, according to data provided by S&P Global Market Intelligence.
This drop comes in spite of the “smart water” industry specialist announcing sales, earnings-per-share, and cash from operations growth of 12%, 23%, and 43% on its third-quarter earnings call this morning. Despite these otherwise impressive results, Badger missed analysts’ expectations on the top line and guided for high-single-digit sales growth going forward, spurring the adverse reaction from the market.
Providing flow measurement, water quality and control, and communications offerings (for its devices’ cloud connectivity), Badger Meter is taking the $20 billion smart water industry by storm. However, after growing sales between 23% and 26% in each of the previous four quarters — and with the company’s valuation at nearly 60 times earnings before today’s decline — Badger needed to deliver perfect results and came up shy.
As jarring as this growth slowdown looks, the company has a number of trends working in its favor.
First, Badger’s advanced metering infrastructure system should play a vital role in the water utility industry’s modernization, with the smart water market expected to double in size by 2029. Its bleeding-edge technology in this space is quickly transforming Badger from a mechanical parts leader into a software-as-a-service (SaaS) business with higher profitability.
Growing its net profit margin from 8% in 2014 to 14% today, the company has stepped up its rate of dividend increases, announcing a 26% boost in Q3 — its 32nd year of hikes in a row.
Ultimately, Badger Meter is a magnificent dividend stock benefiting from numerous megatrends, but at 52 times earnings, any results that are less than perfect could continue harming the stock.
Before you buy stock in Badger Meter, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Badger Meter wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $831,707!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of October 14, 2024
Josh Kohn-Lindquist has positions in Badger Meter. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.