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Badger Meter, Inc. (NYSE:BMI), might not be a large cap stock, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$170 and falling to the lows of US$140. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Badger Meter's current trading price of US$152 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Badger Meter’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Badger Meter
Is Badger Meter Still Cheap?
Badger Meter is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 57.73x is currently well-above the industry average of 15.76x, meaning that it is trading at a more expensive price relative to its peers. Another thing to keep in mind is that Badger Meter’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.
What does the future of Badger Meter look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Badger Meter's earnings over the next few years are expected to increase by 45%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has well and truly priced in BMI’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe BMI should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.