Add to your watchlist #11: Badger Meter, Inc.

Every week, I hunt through global markets looking for companies that make me take notice.

I find plenty of fantastic businesses with rock-solid fundamentals. But right now they're just too expensive based on my valuation standards. So instead of jumping in, it's wiser to add them to your watchlist and wait for a better price.

Let's talk about this week's standout company.

Badger Meter, Inc. (BMI) isn't your typical tech darling. It ia a 119-year-old Milwaukee powerhouse that's been quietly revolutionizing how the world measures water since 1905.

What started as a simple meter manufacturer has morphed into the digital brain behind America's water infrastructure, transforming every drop that flows through pipes into actionable intelligence.

Badger Meter, Inc.

• Symbol: BMI

• Sector: Technology

• Industry: Hardware, Equipment & Parts

• Country: United States

• Listed: NYSE

• Market cap: $5.5bn

• Price: $188.17 (2025-08-07) BMI 0.00%↑

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The Smart water revolution

Utility water solutions: The company doesn't only make water meters, it creates digital ecosystems that turn dumb pipes into smart networks. Their Advanced Metering Infrastructure (AMI) and Advanced Metering Reading (AMR) systems are enabling remote data collection, instant leak detection and surgical billing accuracy. It's the difference between flying blind and having a mission control center for every gallon.

Flow instrumentation: Beyond utilities, Badger Meter's extends into industrial applications where precision matters. From HVAC systems to chemical processing plants, their instruments measure liquids, gases and steam with very high accuracy. They are like the Swiss watchmakers of flow measurement.

Software & analytics: Badger Meter's software platforms transform raw data into operational gold. Leak detection algorithms, network optimization tools and predictive analytics help customers squeeze every efficiency gain from their water systems while slashing non-revenue water losses.

Market forces: the perfect storm for water tech

The global water technology market is experiencing explosive growth, powered by converging trends that read like Badger Meter's strategic playbook:

Infrastructure apocalypse: developed nations are sitting on a ticking time bomb of crumbling water systems. This infrastructure crisis is forcing massive modernization investments, creating a goldmine for smart metering and analytics providers who can transform antiquated networks into intelligent systems.

Water wars reality: global water stress isn't a distant threat, it's today's crisis. As scarcity intensifies, utilities and consumers desperately need technologies that can squeeze every drop of efficiency from existing supplies. Smart water solutions have evolved from nice-to-have to survival-essential.

Digital revolution hits water: the utility sector's digital awakening is finally here. IoT sensors, AI algorithms and predictive analytics are transforming sleepy water departments into high-tech command centers that can predict failures before they happen and optimize operations in real-time.

Regulatory hammer: there are stricter water quality mandates and conservation requirements. Utilities can no longer wing it, they need sophisticated monitoring systems that provide bulletproof compliance data.

Smart city gold rush: as municipalities race to become "smart cities," water management sits at the heart of these initiatives. Real-time monitoring, automated controls and data-driven decision making are today's competitive advantages.

This boom comes with speed bumps: sky-high implementation costs, a shortage of skilled technicians and fierce competition from tech giants eyeing the water sector. But for companies positioned at the intersection of these trends, the opportunities far outweigh the obstacles.

Financial firepower: the numbers tell the story

Badger Meter's 2024 financial performance is an example of operational excellence in action:

Revenue engine: the company delivered a solid 12% growth surge, hitting $700 million with their Utility Water Solutions segment leading the charge. This is smart growth driven by the accelerating adoption of intelligent water technologies that customers can't live without.

Margin mastery: The 40% gross margin showcases a business that's mastered the art of profitable operations, squeezing efficiency gains while maintaining pricing power. The 18.2% operating margin proves this is a profitability machine that knows how to drop dollars to the bottom line.

Profit precision: that 15% net income margin is the result of prudent cost control and operational discipline that separates the winners from the wannabes in industrial markets.

Cash conversion champions: here's where Badger Meter shows its strength: 17% free cash flow margin demonstrates this business doesn't just report earnings, it generates real money. The 20% ROE and 15.8% ROA numbers proves "capital allocation excellence," proving management knows how to turn every invested dollar into maximum shareholder value. These are best-in-class metrics that put Badger Meter in elite company.

My take

Badger Meter represents that rare investment sweet spot: a century-old company that's not just surviving the digital revolution but leading it.

The company sits at the epicenter of three unstoppable forces: crumbling infrastructure demanding urgent modernization, water scarcity creating conservation imperatives and utilities finally embracing the digital age.

Their smart water solutions, especially those game-changing AMI/AMR systems are the technological backbone of tomorrow's water infrastructure.

What makes this investment compelling is the diversification insurance policy built into their business model. Utility and industrial revenue streams provide stability when one sector hits turbulence, while their growing software and services revenue creates that coveted recurring income that smooths out the inevitable bumps. It's a business designed for resilience in an uncertain world.

However, let’s not disregard the fact that infrastructure spending moves in cycles that can turn overnight, competition from deep-pocketed tech giants is intensifying and the relentless pace of technological change means yesterday's innovation becomes tomorrow's commodity.

The biggest challenge? The market has already recognized Badger Meter's quality story, pricing the stock at levels that assume everything goes perfectly.

This is a premium business trading at premium prices. The fundamentals are rock-solid, the growth runway stretches for decades, but the valuation demands patience.

Sometimes the best investments require waiting for Mr. Market to offer a better deal and Badger Meter is just one of those "wait for the dip" opportunities that rewards the patient investor.

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