Oven Maker Cooks the Competition: Middleby
There are some companies whose fortunes are literally tethered to the capital spending cycle.Meet Middleby (MIDD).
Partly as result of 2 smart acquisitons, Middleby's ovens can be found in kitchens spanning 100 plus countries.
A recent upswing in the restaurant sector generated a massive ordering spree for new cooking equipment.
We don't know a gosh darn thing about ovens, but we know this: MIDD is a screaming buy.
In 2006, MIDD will begin shipping a new oven that'll reduce energy costs by 30% or more while cutting cooking time by 25%.
MIDD's margins are stable - for a company that's steel-dependent, that's worth noting -- and the stock trades at a ridiculously low 17 X next year's projected earnings.
Middleby is -- it would seem -- the "perfect stock."
MIDD sports a $600 million market cap, seasoned managment with its feet on the ground, great product and adoption potential, and lastly, visibility within a booming industry (The nation's 900,000 restaurants should hit $476 billion in sales in 2005, according to the NRA).
The only caveat: Middleby's balance sheet -- the debt levels we found surpass those of Middleby's peers.
Nevertheless, Middleby's track record speaks for itself; in addition, this company is (hyper)efficient, with ROA clocking in at a whopping 100%
Everytime we step into one of those trendy oven pizza restaurants, we can't help but ask: "You guys use Middleby, right?"
MIDD recently touched a new 52 week high; moreover, there is a whisper that MIDD may be splitting its stock inside the next month.
Stock splits -- which increase the number of shares, lead to greater liquidity, and boost a stock price -- make a company more accessible to smaller investors.
The real money to be made on MIDD will be made pre-announcement (in the weeks leading up to the split).
Bottom line: things are going to get much hotter for Middleby (the stock's already up 50% for the year) - we're intiating coverage this morning with a strong buy rating.
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