In this article, we’ll summarize a bullish thesis posted on VIC covering Mueller Industries, Inc. (MLI) in late July when MLI stock was trading at $70. Currently, MLI stock is trading at $88.68, which is near its 52-week high of $96.81. So, MLI stock has gained over 26% since the publication of this thesis. MLI stock’s forward PE ratio (GAAP) is at 17.25, and the stock is trading at 2.76 times, trailing twelve-month (TTM) sales.
The VIC thesis on Mueller Industries (MLI) is backed by robust operational improvements, positive market dynamics, and its undervalued status compared to its peers. Leading in relatively unglamorous but vital markets is MLI, a producer of basic components for water infrastructure, HVAC, and industrial uses. The company gains from a good business mix, with its section on piping systems generating most of its operational profits and revenues.
Structural tailwinds like rising copper prices, supply chain interruptions, and lowering rivalry from foreign players have allowed MLI stock to profit. The company has shown extraordinary operational efficiency through efficient cost control and strategic changes to its business mix, almost doubling its EBIT margins over the past five years. Strong demand for its products, along with healthy margin expansion, highlights the premise for ongoing financial outperformance.
A fundamental thesis component is MLI’s capital allocation approach, which is friendly for its shareholder base. Historically, through stock buybacks and special dividends, the corporation has paid significant returns to its owners. Another major capital return project is expected shortly, greatly increasing shareholder value with almost all of its debt gone and free cash flow exploding.
The argument also underlines MLI’s market mispricing. Due to its low public market visibility, the company trades at a substantial discount to peers even with its operational success. The management of the company has started to see the need for further investor participation, which might help to close out the valuation gap.
The thesis contends that MLI is a “hidden gem” ready for major re-rating. Possible catalysts, including further market recognition, continuous capital returns, and strong operational performance, position the stock for long-term value creation.
While acknowledging the potential of MLI stock as an investment, a few AI stocks hold greater promise for delivering greater returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MLI but trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.