Mueller Industries (MLI) may not be a household name. And, while this small-cap stock ($2.5 billion) is somewhat obscure, the company has been around since 1917, notes Hilary Kramer, a leading growth stock expert and editor of GameChangers.
In addition, the quality niche products it makes has given the company quite the international audience, with 27% of its sales last year coming from outside of the United States.
Mueller’s business segments include Piping Systems, Climate Products and Industrial Metals. Through these divisions, the company makes copper tubes, fittings, brass and aluminum forgings, brass rods, copper alloys, refrigeration valves and protective devices and tubular assemblies used for refrigeration.
It serves markets that range from plumbing, heating, air conditioning, refrigeration, appliance, medical, automotive, military and defense, marine and recreational. Its plumbing segment products are used for water distribution systems, and drainage and waste systems.
The company has seen revenues decline slightly over the past two years due to lower copper prices and the slump in manufacturing brought on by COVID-19. Revenues of $2.5 billion in 2018 fell to $2.4 billion by 2020.
However, operating income continued to advance as the company benefited from an improved revenue mix, better margins on copper products despite the lower prices and good execution on costs. Earnings per share (EPS) improved from $1.84 to $2.85 over the two-year period.
Management is confident about the outlook for the company in 2021, as the winding down of the pandemic should bring along top-line growth to go along with the recent improvements the company made in operating efficiencies.
EPS of $3.15 seems realistic, and at 14X this estimate, the company is attractively valued in the industrial segment, where many companies sell for over 20X earnings.
MLI has historically been a consistent company and a great cash generator. Its balance sheet is strong, with long-term debt only 29% of total capitalization, and $476 million of cash and receivables. With some improved top-line results, the stock should be able to realize a better price-to-earnings (P/E) multiple.
