Why Mueller Industries, Inc. (NYSE:MLI) Could Be Worth Watching

Mueller Industries, Inc. (NYSE:MLI), might not be a large cap stock, but it saw a decent share price growth in the teens level on the NYSE over the last few months. As a US$4.1b market cap stock, it seems odd Mueller Industries is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Let’s examine Mueller Industries’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Mueller Industries

What's The Opportunity In Mueller Industries?

Great news for investors – Mueller Industries is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio 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 6.16x is currently well-below the industry average of 20.18x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Mueller Industries’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Mueller Industries generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. However, with an expected decline of -12% in revenues over the next year, short term growth isn’t a driver for a buy decision for Mueller Industries. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although MLI is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to MLI, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on MLI for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. You'd be interested to know, that we found 1 warning sign for Mueller Industries and you'll want to know about this.

If you are no longer interested in Mueller Industries, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.