Mueller Water Products currently trades at $25.89 per share and has shown little upside over the past six months, posting a middling return of 4.3%.

Does this present a buying opportunity for MWA? Or is its underperformance reflective of its story and business quality? Find out in our full research report, it’s free.

Why Are We Positive on Mueller Water Products?

As one of the oldest companies in the water infrastructure industry, Mueller (NYSE: MWA) is a provider of water infrastructure products and flow control systems for various sectors.

1. Operating Margin Rising, Profits Up

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Looking at the trend in its profitability, Mueller Water Products’s operating margin rose by 7.9 percentage points over the last five years, as its sales growth gave it immense operating leverage. Its operating margin for the trailing 12 months was 19.2%.

2. Outstanding Long-Term EPS Growth

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Mueller Water Products’s EPS grew at 21.6% compounded annual growth rate over the last five years, higher than its 7.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

3. Increasing Free Cash Flow Margin Juices Financials

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

As you can see below, Mueller Water Products’s margin expanded by 6.6 percentage points over the last five years. This is encouraging because it gives the company more optionality. Mueller Water Products’s free cash flow margin for the trailing 12 months was 9.6%.

Final Judgment

These are just a few reasons why Mueller Water Products ranks highly on our list, but at $25.89 per share (or 17.2× forward P/E), is now the time to initiate a position? See for yourself in our full research report, it’s free.

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