Badger Meter (BMI)

Water control and measure company Badger Meter (NYSE:BMI) announced better-than-expected revenue in Q3 CY2025, with sales up 13.1% year on year to $235.7 million. Its GAAP profit of $1.19 per share was 9.3% above analysts’ consensus estimates.

Company Overview

The developer of the world’s first frost-proof water meter in 1905, Badger Meter (NYSE:BMI) provides water control and measure equipment to various industries.

Measurement and inspection instrument companies may enjoy more steady demand because products such as water meters are non-discretionary and mandated for replacement at predictable intervals. In the last decade, digitization and data collection have driven innovation in the space, leading to incremental sales. But like the broader industrials sector, measurement and inspection instrument companies are at the whim of economic cycles. Interest rates, for example, can greatly impact civil, commercial, and residential construction projects that drive demand.

Competitors offering similar products include Itron (NASDAQ:ITRI), Xylem (NYSE:XYL), and Mueller Water (NYSE:MWA).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, Badger Meter’s 16.5% annualized revenue growth over the last five years was incredible. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Badger Meter’s annualized revenue growth of 16.1% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong. Badger Meter’s recent performance shows it’s one of the better Inspection Instruments businesses as many of its peers faced declining sales because of cyclical headwinds.

This quarter, Badger Meter reported year-on-year revenue growth of 13.1%, and its $235.7 million of revenue exceeded Wall Street’s estimates by 1.8%.

Looking ahead, sell-side analysts expect revenue to grow 9.2% over the next 12 months, a deceleration versus the last two years. Still, this projection is noteworthy and suggests the market is forecasting success for its products and services.

Badger Meter’s unit economics are great compared to the broader industrials sector and signal that it enjoys product differentiation through quality or brand. As you can see below, it averaged an excellent 40% gross margin over the last five years. Said differently, roughly $40.02 was left to spend on selling, marketing, R&D, and general administrative overhead for every $100 in revenue.

Badger Meter’s gross profit margin came in at 40.7% this quarter, in line with the same quarter last year. On a wider time horizon, Badger Meter’s full-year margin has been trending up over the past 12 months, increasing by 1.7 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Badger Meter has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 17.6%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Badger Meter’s operating margin rose by 4.8 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q3, Badger Meter generated an operating margin profit margin of 19.6%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Badger Meter’s EPS grew at an astounding 23.1% compounded annual growth rate over the last five years, higher than its 16.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Badger Meter’s earnings to better understand the drivers of its performance. As we mentioned earlier, Badger Meter’s operating margin was flat this quarter but expanded by 4.8 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Badger Meter, its two-year annual EPS growth of 27.2% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q3, Badger Meter reported EPS of $1.19, up from $1.08 in the same quarter last year. This print beat analysts’ estimates by 9.3%. Over the next 12 months, Wall Street expects Badger Meter’s full-year EPS of $4.70 to grow 6.7%.

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.

Badger Meter has shown terrific cash profitability, putting it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the industrials sector, averaging 15.5% over the last five years.

Taking a step back, we can see that Badger Meter’s margin expanded by 4.5 percentage points during that time. This is encouraging because it gives the company more optionality.

Badger Meter’s free cash flow clocked in at $48.2 million in Q3, equivalent to a 20.5% margin. This cash profitability was in line with the comparable period last year and above its five-year average.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Badger Meter’s five-year average ROIC was 25.3%, placing it among the best industrials companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Badger Meter’s ROIC has increased significantly over the last few years. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.

One of the best ways to mitigate bankruptcy risk is to hold more cash than debt.

Badger Meter is a profitable, well-capitalized company with $201.7 million of cash and no debt. This position is 3.9% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We enjoyed seeing Badger Meter beat analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Overall, we think this was a solid quarter with some key areas of upside. The stock traded up 2.4% to $192 immediately after reporting.

Updated: December 4, 2025 at 10:16 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Badger Meter.

There are numerous reasons why we think Badger Meter is one of the best industrials companies out there. First of all, the company’s revenue growth was exceptional over the last five years. On top of that, its powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits, and its impressive operating margins show it has a highly efficient business model.

Badger Meter’s P/E ratio based on the next 12 months is 33.5x. Looking across the spectrum of industrials businesses, Badger Meter’s fundamentals clearly illustrate it’s a special business. We like the stock at this price.

Wall Street analysts have a consensus one-year price target of $219.50 on the company (compared to the current share price of $179.44), implying they see 22.3% upside in buying Badger Meter in the short term.