3 Reasons MIDD is Risky and 1 Stock to Buy Instead

Middleby currently trades at $149.97 per share and has shown little upside over the past six months, posting a middling return of 4%.

Is now the time to buy Middleby, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Why Do We Think Middleby Will Underperform?

We're cautious about Middleby. Here are three reasons why you should be careful with MIDD and a stock we'd rather own.

1. Core Business Falling Behind as Demand Declines

We can better understand Professional Tools and Equipment companies by analyzing their organic revenue. This metric gives visibility into Middleby’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.

Over the last two years, Middleby’s organic revenue averaged 4.3% year-on-year declines. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Middleby might have to lean into acquisitions to grow, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus).

2. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Middleby’s revenue to rise by 2.2%. Although this projection indicates its newer products and services will spur better top-line performance, it is still below the sector average.

3. EPS Barely Growing

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

Middleby’s EPS grew at an unimpressive 8% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 5.5% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.

Final Judgment

Middleby falls short of our quality standards. That said, the stock currently trades at 15× forward P/E (or $149.97 per share). This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are better stocks to buy right now. We’d recommend looking at an all-weather company that owns household favorite Taco Bell.

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