Investment Thesis
Badger Meter demonstrates exceptional financial stability with fortress-like balance sheet metrics (3.0x current ratio, zero debt, $205.5M cash), but the extraordinary 17,789% YoY revenue growth appears driven by acquisition/consolidation rather than organic expansion, masking underlying capital inefficiency. Weak returns on capital (ROE 4%, ROA 2.8%) despite solid operating margins (17.4%) and positive free cash flow ($29.5M) suggest the massive revenue base is not being translated into commensurate shareholder value.
Strengths
- Fortress balance sheet with zero debt and minimal liabilities ($16.8M on $970.8M assets)
- Exceptional liquidity with 3.0x current ratio and $205.5M cash position providing strategic flexibility
- Positive free cash flow generation ($29.5M) with strong FCF margin of 14.6%
- Solid operating margins at 17.4% indicate core business pricing power and operational execution
Risks
- Unsustainable revenue growth rate (17,789% YoY) indicates major acquisition/consolidation event masking organic growth visibility and integration execution risk
- Critical capital efficiency weakness with only 4.0% ROE on $690.4M equity base and 2.8% ROA, signaling poor asset utilization or over-capitalization
- Disconnect between revenue explosion and modest 13.4% net income growth suggests margin compression, integration costs, or revenue quality concerns
- Elevated insider activity with 43 Form 4 filings in 90 days may signal management uncertainty or potential governance concerns
Key Metrics to Watch
- Organic revenue growth rate post-acquisition (separation of organic vs. acquisition-driven growth)
- Return on Equity and ROIC trends over next 4 quarters (capital efficiency recovery)
- Operating margin sustainability as integration completes
- Free cash flow conversion rate and cash deployment strategy
Financial Metrics
Revenue
202.3M
Net Income
27.3M
EPS (Diluted)
$0.93
Free Cash Flow
29.5M
Total Assets
970.8M
Cash
205.5M
Profitability Ratios
Gross Margin
41.7%
Operating Margin
17.4%
Net Margin
13.5%
ROE
4.0%
ROA
2.8%
FCF Margin
14.6%
Balance Sheet & Liquidity
Current Ratio
3.00x
Quick Ratio
1.97x
Debt/Equity
0.00x
Debt/Assets
1.7%
Interest Coverage
N/A
Long-term Debt
N/A
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-04-29T13:03:45.565446 |
Data as of: 2026-03-31 |
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