Badger Meter: A Descent into Valuation

The market, that fickle beast, has once again turned its gaze upon Badger Meter, and the judgment, as of this Wednesday, is a precipitous decline – a shedding of value amounting to ten percent. One might ask, what sin has this company committed to warrant such swift condemnation? The answer, as is so often the case, lies not in malice, but in the relentless, unforgiving calculus of expectation. The full year’s tally – a respectable eleven percent rise in revenue, thirteen in earnings per share, and a robust nineteen in free cash flow – seems almost… irrelevant, swallowed by the shadow of a fourth-quarter shortfall.

Eight percent growth in the final quarter, a mere two percent organically… a trifle, one might think. Yet, it was enough to provoke the wrath of Wall Street, to send tremors through the carefully constructed edifice of investor confidence. The stock, already burdened by the anxieties of the past year, has now fallen roughly thirty percent. It is a humbling spectacle, a reminder that even the most promising enterprises are not immune to the capricious winds of fortune.

Is This a Fall from Grace, or a Chance for Redemption?

One can almost feel the collective sigh of disappointment emanating from the market. A shortfall of eleven million dollars… a wound, perhaps not fatal, but certainly painful. It is a testament to the insatiable appetite for growth, the relentless demand for ever-increasing returns. But to focus solely on the miss is to miss the deeper currents at play. To see only the shadow, and not the faint glimmer of light within.

Consider this: margins continue to improve, driven by a strategic shift towards technology-focused solutions. Smart Cover, an acquisition slated for 2025, demonstrated a healthy twenty-five percent growth. And, most significantly, Badger Meter has secured the largest deal in its history – a project in Puerto Rico, poised to commence in 2026. These are not the signs of a failing enterprise, but of a company adapting, evolving, striving to overcome the obstacles in its path.

Margins are slowly, relentlessly, climbing, as the company embraces the cold logic of technology.
Smart Cover, a future promise, already shows a pulse of growth.
The Puerto Rico project… a grand undertaking, a potential salvation.
Software-as-a-Service, a quiet revolution, now accounts for nearly ten percent of total sales.

Even more compelling is the pronouncement of Chief Executive Officer Kenneth Bockhorst, a man who seems to possess a quiet understanding of the forces at play. He speaks of a “concentrated mix of concluding AMI turnkey projects,” a temporary lull before the storm. He anticipates this dynamic will persist through the first half of 2026, until the awarded projects begin to bear fruit. It is a confession, perhaps, but also a declaration of faith – a belief that the current hardship is merely a prelude to future prosperity.

“The second half of 2025 included a concentrated mix of concluding AMI turnkey projects, resulting in base revenue growth that was lower than our five-year forward outlook. Looking ahead, we expect this dynamic to persist through the first half of 2026, until several awarded projects begin multi-year turnkey deployments.”

For years, Badger Meter traded at an average of forty-three times free cash flow – a valuation, one suspects, fueled by excessive optimism. Now, humbled by recent events, the stock has fallen to a more reasonable twenty-six times. It is a correction, a return to earth. And in this, there is opportunity. I have been, and will continue to be, a buyer of Badger Meter in 2026. It remains, in my estimation, an excellent long-term holding – a company dedicated to dragging the world’s antiquated water infrastructure into the modern era. A noble, if somewhat thankless, task. And perhaps, in the grand scheme of things, that is enough.

2026-01-28 19:42

Is This a Fall from Grace, or a Chance for Redemption?

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