Mueller Water Products Inc-A (NYSE:MWA) Fits the Peter Lynch Investment Strategy

Investment methods that mix growth possibility with fair prices have long drawn investors looking for lasting results. The Peter Lynch technique, explained in his book One Up on Wall Street, centers on finding companies with good but controlled profit increases, sound financial condition, and prices that are not excessive. This system stresses basic evaluation instead of trying to time the market, aiming for enterprises that can provide steady results over many years. One firm that recently appeared using a filter built on Lynch’s principles is Mueller Water Products Inc-A (NYSE:MWA).

Fitting Peter Lynch’s Growth and Price Guidelines

A central part of Lynch’s method is to locate companies increasing profits at a sound, maintainable speed, usually between 15% and 30% each year over five years. This confirms the enterprise is growing without the unreasonably fast increase that frequently causes instability. Mueller Water Products shows this with a five-year EPS growth figure of 20.76%, putting it directly inside Lynch’s preferred band. This steady increase signals a firm that is successfully enlarging its activities over time.

The system also puts a strong focus on price through the PEG measurement, which contrasts the price-to-earnings number to the profit growth figure. A PEG measurement at or under 1 implies a stock could be fairly valued compared to its growth path. Mueller Water Products has a PEG measurement of 0.88, satisfying Lynch’s condition and signaling that its present share cost does not overprice its growth outlook.

Financial Condition and Earnings Strength

Lynch required putting money into companies with good balance sheets to endure economic slumps. Important screens involve a debt-to-equity measurement below 0.6 and a current ratio above 1. Mueller Water Products performs well on both counts:

• Debt-to-Equity Ratio: 0.48, signaling a careful financial setup with more ownership funding than debt.
• Current Ratio: 3.86, showing a strong capacity to meet immediate responsibilities with available resources.

Earnings strength is another key part, judged by return on equity (ROE). Lynch looked for companies with an ROE above 15%, meaning effective use of investor money. Mueller Water Products provides an ROE of 16.05%, verifying its capacity to produce good earnings from its ownership base.

Basic Evaluation Summary

A closer look into the firm’s total basic measures supports the initial filter outcomes. The full basic report for MWA gives the stock a score of 6 out of 10. The evaluation points out two especially good parts: earnings strength and financial condition.

The company gets high scores for its profit percentages and returns on investment, doing better than a large segment of similar firms in the machinery field. Its financial condition is also strong, marked by high cash ratios and a workable debt amount, adding to a sound Altman-Z score that indicates a small chance of financial failure. While the price is viewed as similar to field norms, the report states that the firm’s growth is predicted to slow in the next few years, a point investors with long-term views should watch.

A Stock for the Long Term

Mueller Water Products works in the needed water infrastructure area, making items for the movement, delivery, and calculation of water. This matches another Lynch idea: putting money into understandable enterprises that supply required, if occasionally ordinary, products and services. The firm’s concentration on a vital public utility area provides a level of steadiness and foreseeable need, which can be beneficial for a many-year, buy-and-keep plan.

For investors curious about locating other companies that match this strict method, the Peter Lynch system filter is ready to run your own evaluation. The filter can assist in finding a varied collection of companies that satisfy these strict growth, price, and financial condition rules.

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Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation to buy or sell any security, or an endorsement of any investment strategy. All investments involve risk, including the possible loss of principal. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.