Mueller Industries

Stock: MLI

Rating: Buy

Author: Waleed M. Tariq

Overview

  • The corporation offers copper, brass, aluminum, and plastic in South Korea, North America, China , Britain, the Middle East, and Mexico.
  • Three revenue-generating segments: Piping Systems, Industrial Metals, and Climate

Bullish

  • Its past consistent and epic performance shows it won’t change soon.
  • It has low debt, great profitability, high growth, and a good valuation.
  • Current market trends demand the company’s staple items, thus demand is high.

Bearish

  • Due to macroeconomic uncertainties, the company may have problems retaining profitability.

Housing Market

  • Form 10-Q March 2022 1.79 million homestarts. Inflation, 12-year high mortgage rates, high building material costs, supply constraints, uncertain economy, and recession lowered this to 1.724 million.
Source: Census.gov

Commodity Pricing

  • High commodity prices in 2022 boosted revenues by 23.4% YoY, but copper prices have fallen in Q2 and are expected to remain poor, limiting Mueller’s high spreads.
Trading Economics
MLI Form-10Q

Debt & Liquidity

  • The company’s debt-free balance sheet, rising book value per share, and 8.04 Altman Z score indicate its good financial situation.
Data by YCharts
  • Its Levered FCF margin of 8.64 percent is 165 percent better than the industry median of 3.26 percent, adding to its current ratio of 2.75 and Quick ratio of 1.61, indicating the company can cover its short-term creditors.
Data by YCharts

Valuation

  • The stock is undervalued by at least $100 based on the company’s 5-year average and industry medians.

Conclusion

  • The long-term buy-and-hold gains of the corporation outweigh the short-term risks of a recession.