Jefferies Initiates Badger Meter (BMI) with Buy Rating as Smart Water Demand Stays Intact

Badger Meter, Inc. (NYSE:BMI) is included among the 12 Best Long Term US Stocks to Buy Now.

On December 12, Jefferies initiated coverage of Badger Meter, Inc. (NYSE:BMI) with a Buy rating and a $220 price target. The firm described Badger Meter as a leader in smart water metering and said the recent slowdown in growth stems from tough comparisons and a higher base. It is not a sign of weakening demand, the analyst said.

The recent pullback, in Jefferies’ view, creates “an attractive entry point for the name that compounds HSD organic growth,” the analyst added.

Badger Meter, Inc. (NYSE:BMI) also brings a strong track record as a serial acquirer. Since 2010, the company has completed 14 acquisitions, steadily reinforcing its leadership position in water technology. Earlier this year, it announced the purchase of SmartCover Systems from XPV Water Partners for $185 million. In its third-quarter earnings update, management said it remains on track to deliver the expected sales and cost synergies tied to the SmartCover deal.

As the company has added more software and technology solutions through these acquisitions, its free cash flow profile has improved meaningfully. FCF margins have climbed from about 6% in 2015 to roughly 18% today, helped by the rapid expansion of its software-as-a-service offerings.

That growing free cash flow base is a key reason Badger Meter, Inc. (NYSE:BMI) stands out as a dividend growth story. The current dividend yield sits at around 0.9%, which may not turn heads, but the company uses only about 25% of its FCF to fund dividend payments. That leaves ample room for future increases, especially if margins continue to move higher. Badger Meter has now raised its dividend for 33 straight years.

Backed by more than a century of innovation in water technology, Badger Meter, Inc. (NYSE:BMI) delivers end-to-end water management solutions through its BlueEdge suite.

While we acknowledge the potential of BMI as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.