Badger Meter, Inc. (BMI): A Bull Case Theory

We came across a bullish thesis on Badger Meter, Inc. on Daniel's Deep Dive’s Substack. In this article, we will summarize the bulls’ thesis on BMI. Badger Meter, Inc.'s share was trading at $146.58 as of January 30th. BMI’s trailing and forward P/E were 30.15 and 27.78 respectively according to Yahoo Finance.

Badger Meter (BMI) operates as a leading provider of smart water infrastructure solutions in the United States, serving the critical needs of over 50,000 local utilities responsible for sourcing, treating, and distributing water. The company offers a comprehensive portfolio of hardware, connectivity, and software under the BlueEdge platform, including advanced metering infrastructure (AMI) systems like ORION and BEACON. These solutions provide utilities with real-time monitoring, leak detection, and actionable insights to manage aging water networks, which currently lose nearly 20% of treated water due to outdated pipes.

Approximately 88% of BMI’s revenue comes from its Utility Water segment, with recurring software and service revenue growing faster than hardware sales, supporting margin expansion. Over the past decade, the company has achieved roughly 9% revenue growth and 17% earnings growth, benefiting from structural investments in network modernization, selective acquisitions like SmartCover, and a shift toward higher-margin AMI solutions.

Competitive advantages include integrated hardware-software systems, technical precision, long product lifecycles, and high switching costs, though competition remains robust and pricing power limited. Profitability is strong, supported by efficient production, low capital intensity, and disciplined R&D, enabling a free cash flow yield that funds dividends, selective acquisitions, and growth initiatives.

The company maintains a net cash position and minimal debt, providing flexibility for future development. While BMI’s fundamentals are solid, with a 33-year dividend growth record and predictable long-term demand driven by regulatory requirements and infrastructure renewal, the current share price of $174 exceeds a conservative entry level of $120, suggesting limited near-term upside despite compelling long-term prospects.

Previously, we covered a bullish thesis on Badger Meter, Inc. (BMI) by Durable Value Creators in November 2024, which highlighted the company’s smart water ecosystem, AMI adoption, recurring software revenue, and growth potential from aging U.S. water infrastructure. BMI’s stock price has depreciated by approximately 33.13% since our coverage due to broader market adjustments and high valuation. Daniel’s Deep Dive shares a similar perspective but emphasizes BMI’s BlueEdge platform, margin expansion, and disciplined capital allocation.

Badger Meter, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 28 hedge fund portfolios held BMI at the end of the third quarter which was 32 in the previous quarter. 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.