Should You Investigate Mueller Industries, Inc. (NYSE:MLI) At US$78.63?

Simply Wall St
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Mueller Industries, Inc. (NYSE:MLI), might not be a large cap stock, but it saw a decent share price growth in the teens level on the NYSE over the last few months. As a US$4.5b market cap stock, it seems odd Mueller Industries is not more well-covered by analysts. Although, there is more of an opportunity for mispricing in stocks with low coverage, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Mueller Industries’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Mueller Industries

Is Mueller Industries Still Cheap?

Great news for investors – Mueller Industries is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Mueller Industries’s ratio of 6.66x is below its peer average of 19.4x, which indicates the stock is trading at a lower price compared to the Machinery industry. What’s more interesting is that, Mueller Industries’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Mueller Industries look like?

earnings-and-revenue-growth
earnings-and-revenue-growth

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of Mueller Industries, it is expected to deliver a negative revenue growth of -16% next year, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Although MLI is currently trading below the industry PE ratio, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to MLI, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on MLI for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - Mueller Industries has 1 warning sign we think you should be aware of.

If you are no longer interested in Mueller Industries, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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