Is Badger Meter (BMI) A Bargain After Its Recent Pullback?

Badger Meter (BMI) is in focus after recent share price weakness, with the stock closing at US$136.44. That puts the company’s market value at about US$4.0b and invites a closer look at current valuation.

See our latest analysis for Badger Meter.

Recent trading has been soft for Badger Meter, with a 1 day share price return of down 1.74% and a 30 day share price return of down 5.37%. The 90 day share price return of 18.60% stands in contrast to a year to date share price return of down 22.65% and a 1 year total shareholder return of down 27.00%.

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Badger Meter now trades below the average analyst price target and slightly above one estimate of intrinsic value. Is the recent pullback an opportunity, or a signal that the market’s caution on the stock is warranted?

Most Popular Narrative: 12% Undervalued

Based on the most followed narrative, Badger Meter's fair value sits at about $155.11 compared with the last close at $136.44. That gap rests on a detailed set of growth, margin and valuation assumptions that investors should understand before taking a firm view.

The rapid expansion and integration of IoT-enabled products and real-time analytics, as seen in the rollout of BEACON and new machine-learning-enabled products like Cobalt, are accelerating customer adoption of recurring, higher-margin software and data solutions. This is contributing to improved revenue visibility and ongoing net margin enhancement.

Read the complete narrative.

Want to see what kind of revenue path and profit profile this implies for Badger Meter? The narrative leans on rising software weight, richer margins and a future earnings multiple that assumes investors keep paying up for that mix shift.

Result: Fair Value of $155.11 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, that narrative can quickly be challenged if large municipal AMI projects are delayed, or if higher input and SG&A costs pressure Badger Meter's margins.

Find out about the key risks to this Badger Meter narrative.

Another View: What Badger Meter’s P/E Is Saying

The earlier narrative leans on future growth to argue Badger Meter is about 12% undervalued. The current P/E of 31.5x is slightly below the US Electronic industry at 31.8x and well below peers at 53.1x, yet it still sits above a fair ratio estimate of 24.5x. Is the stock priced for more optimism than the model suggests?

See what the numbers say about this price — find out in our valuation breakdown.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Badger Meter for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 51 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With sentiment on Badger Meter mixed after recent moves, this is a good moment to check the numbers yourself and decide where you stand. To see what optimism in the data looks like in practice, take a closer look at the 2 key rewards.

Looking for more investment ideas beyond Badger Meter?

If Badger Meter has caught your attention, do not stop there. Use this moment to broaden your watchlist and spot other opportunities that might fit your goals.

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• Strengthen your income stream by scanning companies with robust payouts using the 9 dividend fortresses.
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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.

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