The Middleby Corporation (NASDAQ:MIDD): Is Growth Priced In?

The Middleby Corporation (NASDAQ:MIDD) is a stock well-positioned for future growth, but many investors are wondering whether its last closing price of $109.7 is based on unrealistic expectations. Let’s look into this by assessing MIDD’s expected growth over the next few years.

Check out our latest analysis for Middleby

Where’s the growth?

Investors in Middleby have been patiently waiting for the uptick in earnings. If you believe the analysts covering the stock then the following year will be very interesting. The consensus forecast from 9 analysts is buoyant with earnings forecasted to rise significantly from today’s level of $5.916 to $8.383 over the next three years. This results in an annual growth rate of 11%, on average, which signals a market-beating outlook in the upcoming years.

Is MIDD’s share price justified by its earnings growth?

Middleby is available at price-to-earnings ratio of 18.54x, showing us it is undervalued based on its latest annual earnings update compared to the Machinery average of 18.85x , and overvalued compared to the US market average ratio of 17.05x .

NasdaqGS:MIDD Price Estimation Relative to Market, August 15th 2019
NasdaqGS:MIDD Price Estimation Relative to Market, August 15th 2019

We already know that MIDD appears to be undervalued based on its PE ratio, compared to the industry average. But, since Middleby is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 18.54x and expected year-on-year earnings growth of 11% give Middleby a higher PEG ratio of 1.67x. This means that, when we account for Middleby’s growth, the stock can be viewed as a bit overvalued , based on its fundamentals.

What this means for you:

MIDD’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:

  1. Financial Health: Are MIDD’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has MIDD been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of MIDD’s historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.