Technology Sector Ideas

[gfp927z]

>>> Why Badger Meter Stock Slumped 5 Percent Today


Motley Fool

By Rich Smith

Sep 29, 2023


https://www.fool.com/investing/2023/09/29/why-badger-meter-stock-slumped-5-percent-today/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


KEY POINTS

Badger Meter announced its earnings date yesterday.

This morning, investment bank Northcoast responded by downgrading the stock.

It's run up 68% in 52 weeks, but Northcoast says it's time to sell Badger Meter stock.


What happened

Badger Meter (BMI) stock slumped 5.6% through 10:25 a.m. ET this morning after receiving a downgrade to sell from investment bank Northcoast.

According to the analyst, Badger Meter stock, which cost more than $155 a share just last night, is likely to lose 23% of its value and fall to $120 per share within a year.

So what

So why exactly did Northcoast downgrade Badger Meter stock? That's hard to say. Although two separate ratings watchers -- StreetInsider and TheFly -- confirm that the downgrade happened, neither reporter gave any further details on Northcoast's reasoning. But I think we can guess.

It seems reasonable to assume that the catalyst sparking the downgrade came when Badger Meter announced yesterday that it will report third-quarter earnings on Thursday, Oct. 19 -- and that the analyst is worried Badger Meter might disappoint.

Now what

That's not an unreasonable fear. Over the past 52 weeks, shares of this provider of water metering equipment have rocketed 68%, lifted by strong sales and earnings growth (up 28% and 33%, respectively, in the most recent quarter).

That sounds like good news -- and it is. Furthermore, analysts who follow the stock are predicting even more good news in Q3, where the stock is expected to report 21% sales growth (to more than $179 million) and another quarter of 33% earnings growth (to $0.81) per share.

That being said, these are very optimistic targets being set for the company, and if Badger Meter fails to hit them, the stock could fall hard. At last report, Badger Meter shares were selling for nearly 60 times earnings. But with earnings growth projected to slow over time to average about 15% annually over the next five years, this leaves the stock trading for a rather optimistic price/earnings-to-growth (PEG) ratio of nearly 4 -- quite expensive for any manufacturer, even one as successful as Badger Meter has been lately.

Even if you think the risk of Badger Meter underperforming next month is small, Northcoast's sell rating serves as a reminder: Sometimes it's best to take your winnings and declare victory, rather than roll the dice one more time on a stock that has already gone up quite a lot.

<<<



---