BADGER METER, INC. (BMI): what the price assumes

In the published model solve dated 2026-Q2, anchored at $135.61, BADGER METER, INC. (BMI) is priced for +25.0% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/BMI

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 9: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 9.7% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

Every valuation family lands below the price. The price therefore sits beyond what those standard frames encode.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.3%); the inversion above states its own rate.

Per-Model Detail (n=15)

Economic-Unit Decomposition (Sum Of The Parts)

Only one reportable economic unit is present in the current topology source. Consolidated operating lenses remain available, but there is no multi-unit decomposition.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• Nearly nine-tenths of what Badger Meter sells does one job, replacing municipal water meters with ultrasonic units wired to cellular endpoints and a subscription data layer, and that line brought in $816.1 million in 2025, up 12.5% from the prior year's $725.5 million.
• The replacement cycle arrives in lumps rather than a stream: second-quarter 2026 sales of $222.3 million landed 7% under the prior-year quarter and operating margin slipped to 17.7% from 18.8%, even with revenue up 10% against the March quarter.
• The December quarter settles the year, because management has guided 2026 organic revenue to roughly flat against 2025 with the growth back-loaded into the ramp of nine large awarded projects.

Bull Case

Only one way of valuing Badger Meter reaches its share price, and it happens to be the one that credits the future. Price the company on its book and the returns it earns on that book, and the asset-based lenses leave a premium of about 161% still to be explained. Capitalize the profit it makes right now, crediting no growth at all, and the earnings-power lenses stop at almost the same distance. Comparable-multiple approaches close roughly half of what is left. The forward cash-flow projection is the only frame that arrives, and it gets there on ordinary inputs rather than heroic ones. So the spread is not really an argument about arithmetic. It is an argument about whether American water utilities keep buying meters at the pace they have been buying them.

Start with why they buy at all. A mechanical water meter is a small turbine. It spins as water passes, it wears, and as it wears it undercounts, which means the utility keeps delivering water it never bills for. An ultrasonic meter has no moving parts and reports itself daily over a cellular link. The purchase substantially pays for itself out of revenue the utility was already losing, which is why a meter upgrade does not require the political fight that a rate increase does. The annual filing frames the same mechanism from the customer's side: "The Company provides flow measurement technology critical to providing baseline usage data and to quantify reductions as customers attempt to reduce consumption."

What has changed in recent years is what rides on top of the hardware. Utility water, roughly 89% of net sales in 2025, grew 12.5% to $816.1 million on adoption of ultrasonic meters, ORION Cellular endpoints, water quality products and BEACON SaaS, per the annual filing. The company describes the assembled offering this way: "Our BlueEdge tailorable smart water solutions provide actionable information through data analytics derived from an interconnected and interoperable network of sensors". Strip the vocabulary and the economics are simple. The meter is sold once and installed once. The data layer is billed every year afterward, and renewing it does not send another truck to the street.

The margin record is where that shows up. BMI converts 19.6% of trailing revenue into operating profit. ITRI, whose revenue of 2.35 billion dollars is more than twice Badger's, converts 13.0%. TRMB manages 17.3% and FTV 17.6%. Only VLTO, a considerably larger company, does better at 23.1%. Keeping a bigger share of each sales dollar than nearly everyone in the measurement-instrument cohort, while being one of the smallest members of it, is not a scale story. It is a pricing story, and pricing power in a market where the buyer is a monopoly utility with a multi-year replacement horizon tends to be sticky. The filing also notes the company "enjoys favorable patent positions for several of its products".

The financing side is almost dull, which for a business priced on durability is the point. The annual filing reports no short-term borrowings at the end of either 2025 or 2024. Capital spending ran 14.0 million dollars in 2025 against 12.8 million the year before, with 15.0 to 19.0 million guided for fiscal 2026. Set that against free cash flow near 169 million dollars and you have an operation that turns profit into spendable money and asks for very little of it back. Shareholders received 35.8 million dollars of dividends in 2024, and the share count has not moved across the four years to March 2026, so per-share figures here are not being manufactured by shrinking the denominator.

There is also a second leg that did not exist a few years ago. Flow instrumentation, the smaller commercial and industrial half of the business, grew 6% year over year in the second quarter of 2026, helped by data centers metering cooling tower water and by clamp-on meters. That is a niche and not a thesis. But it is the kind of adjacency that gives a municipal replacement cycle somewhere else to go when the municipal budget cycle turns slow.

Bear Case

Badger Meter's risk register opens somewhere a software-adjacent story usually does not: customs. The company machines and assembles physical objects out of metal, plastic and electronics, and it buys those inputs across borders. Its own annual filing states the exposure without hedging: "increased tariffs on imports into the United States, including those from China, Mexico, Canada and Europe could harm our sales and results of operations. These tariffs are likely to increase the cost of raw materials essential to our manufacturing processes". The same document adds that "The inability to obtain adequate supplies of raw materials and component parts for our products at reasonable prices could have a material adverse effect on our business, financial condition or results of operations by decreasing profit margins and by negatively impacting timely deliveries to customers."

A commercial supplier passes an input cost increase along within a quarter. This one often cannot. Its customer is a municipal utility working from a budget approved a year in advance, buying under a contract awarded well before that, and unable to raise its own prices without a public process. Trade costs therefore land on the cost line long before they can be recovered on the price line. That lag is precisely where a 19.6% operating margin gets thinner, and the margin is doing a great deal of work in this story.

Now set that against what the price is asking for. Today's quote pays about 21 times company-wide operating income, which embeds operating profit compounding near 21% a year for five years. The most recent quarter went the other direction: operating earnings fell 12% against the prior-year quarter and the margin slipped from 18.8% to 17.7%. Management has guided the full year to roughly flat organic revenue versus 2025. Flat and 21% are a long way apart. The bull answer is that the gap is shipment timing rather than demand, and that may well be right. But if the requirement reverts toward what the company has been delivering, the multiple has to travel with it, and both the peer-multiple and earnings-power frames sit far below where the shares trade now.

A quieter version of the same worry sits inside the earnings record. Value the business on a five-year average of operating income, roughly 130 million dollars with one-time charges added back, and the price sits about three times above where that earnings-power lens lands. Trailing operating income is 175.5 million dollars, roughly a third above that average. Either the last twelve months are the new base and the average is stale, or the average is the truer center and the trailing year is near a peak. A buyer at the current price is required to believe the first without much in the recent prints to confirm it.

The demand side carries its own delay risk, and the filing names it directly: customers "may delay capital projects, including non-critical maintenance and upgrades, or may not have the ability to authorize and finance purchases during economic downturns, instability in world markets, and a higher interest rate environment". Rates bite this thesis twice. A utility financing a system-wide meter replacement borrows to do it, so a higher cost of money pushes the project to the right. And the valuation arithmetic itself is unusually rate-sensitive: one percentage point on the cost of capital shifts the growth the price requires by roughly seven points. Almost nothing else in this company's story has that much leverage on the answer.

The near-term growth is also concentrated in a small number of counterparties. The second-half ramp rests on a cohort of nine large awarded projects, one of them the Puerto Rico Aqueduct and Sewer Authority. Shipments there have begun, and management said in July that a letter from Puerto Rico's Resident Commissioner published in early June had not changed its view of the project. Concentration like that turns a single procurement dispute into a quarter. Meanwhile ITRI, a competitor several times Badger's size, tells its own shareholders that rivals in this market can offer products and services at lower prices to gain or grow share. Badger Meter's margin is evidence that it has not yet had to compete that way. It is not evidence that it never will.

Valuation

Begin with what the price assumes rather than what it is. Buyers are paying about 21 times company-wide operating income, and running that backwards produces a concrete requirement: operating profit compounding near 21% a year across a five-year stretch, discounted at a 9.8% cost of capital and fading to 4% growth afterward. Keep those figures approximate, because they come from a single solve under fixed assumptions rather than from a measurement. What is useful is the shape of the demand, not its decimal places.

How unusual is that demand? Less than it first sounds, on two of three tests. The near-term pace is inside what Badger Meter has recently delivered, so the market is not asking for a new speed. Against the wider set of comparable industrial-technology names, the multiple sits in the lower half of the range. The third test is where it bites. Of companies that have grown at this pace, only about 36% held it for a full five years. The stretch is duration, not velocity, and duration is the assumption that fails without announcing itself.

The methods split cleanly along that line. Book value plus the returns earned on it leaves the asset-based lenses carrying a premium of roughly 161% to explain. Capitalizing today's profit with no growth credited leaves the earnings-power lenses a premium near 164%, which is the same verdict reached a second way. Comparable-multiple approaches land closer, with a premium around 64%. Nothing static defends this quote. Only the forward cash-flow projection arrives, and it gets there on unremarkable inputs, roughly 5% revenue growth carried across the same five-year stretch. So the whole disagreement reduces to one question about persistence, and every static method has already voted no.

The inputs underneath are not exotic. Utility water, roughly 89% of net sales in 2025, generated $816.1 million, up 12.5% from $725.5 million, per the annual filing. Capital spending was 14.0 million dollars in 2025 with 15.0 to 19.0 million guided for fiscal 2026, so the compounding does not depend on a heavy build. Where the company already sits among its comparables matters for the same reason. BMI turns 19.6% of trailing revenue into operating profit. ITRI, more than twice its size, turns 13.0%. TRMB turns 17.3%, FTV 17.6%, and VNT 18.4%. Only VLTO runs richer, at 23.1%. Very little margin gap is left to harvest, which means the growth the price wants has to come almost entirely from volume, and volume in this market is set by municipal procurement calendars.

That leaves the financing picture, which is the least eventful part of the story and informative for exactly that reason. The annual filing reports no short-term borrowings at the end of 2025 or 2024. Free cash flow ran near 169 million dollars against operating income of 175.5 million dollars, and the share count is unchanged over the four years to March 2026. Nothing here forces a decision on anybody. If the growth does not show up, no covenant trips and no financing has to be raised; the shares simply drift back toward the frames that never reached them. What a holder is exposed to is a repricing, not a solvency event, and those are different kinds of loss.

Catalysts

The second-quarter print, released on July 22, 2026, is the most recent hard information and it cut both ways. Sales of $222.3 million were 7% below the prior-year quarter's $238.1 million but 10% above the March quarter. Diluted earnings per share came in at $1.02 against $1.17 a year earlier, and operating earnings of $39.4 million were down 12% year over year, with operating margin of 17.7% versus 18.8% in the comparable quarter. The sequential improvement came largely from the initial shipment ramp on several large awarded projects.

Guidance is the piece that moves the story from here. Management reaffirmed full-year 2026 organic revenue at roughly flat against 2025, with growth weighted toward the fourth quarter, and the chief executive described the outlook as flat-ish rather than flat given uneven project ramping and short-term order patterns. The company also said it expects full-year free cash flow conversion above 100% of net earnings as elevated inventory is worked down. Both statements point at the same thing: the year is a working-capital and shipment-timing year, and the December quarter carries the burden of proof.

Two specifics are worth tracking. Product shipments for the Puerto Rico Aqueduct and Sewer Authority have officially begun as part of the nine-project cohort, and management stated that a letter from Puerto Rico's Resident Commissioner published in early June had not changed its view of that project. Separately, flow instrumentation sales rose 6% year over year on demand from data center applications including cooling tower monitoring and clamp-on meters. The first is a risk to the back-half ramp; the second is the only part of the business currently growing off a non-municipal customer.

Peer Cohorts (Per Segment, With Filing Citations)

Badger Meter (flow measurement) (reported)

• ITRI (Itron, Inc.)
• FY2025 10-K: …sensors, and data analytics operating upon a flexible technology platform that allows our customers to address the changing macro trends listed above, as well as the pressing industry challenges to better manage and control assets, intelligently benchmark, secure revenue, lower operational costs, improve customer…
• FY2025 10-K: …and municipalities to safely, securely, and reliably operate their critical infrastructure. Our solutions include the deployment of smart networks, software, services, devices, sensors, and data analytics that allow our customers to manage assets, secure revenue, lower operational costs, improve customer service,…
• VLTO (VERALTO CORPORATION)
• FY2025 10-K: In-Situ is a global leader in environmental water measurement and monitoring solutions with a leading portfolio of water quality sondes, water quality sensors and data management solutions that help customers monitor and measure the quality or quantity of surface and groundwater. RESULTS OF OPERATIONS Non-GAAP…
• FY2025 10-K: …activities. WQ focuses on what management believes are the most attractive sub-segments of the water value chain helping our customers address some of their most pressing and complex challenges, such as water scarcity, water safety, severe weather events and management of precious natural resources. Our businesses…
• VNT (Vontier Corporation)
• FY2025 10-K: …operations for our customers' site covering forecourts, stores and other on-site services including quick service restaurants, car washes and EV charging. We have a large installed customer base with point-of-sale and self-checkout technology, payment processing and workflow software, payment terminals, site…
• FY2025 10-K: …features, convenience and the other factors described under "Competition." Environmental & Fueling Solutions Environmental & Fueling Solutions is a leading manufacturer and provider of solutions to improve safety, environmental compliance and fueling efficiency globally. Through brands including Gilbarco Veeder-Root…
• FTV (Fortive Corp)
• FY2025 10-K: …performance in order to validate the results of the market approach. The discounted cash flow model requires judgmental assumptions about projected revenue growth, future operating margins, discount rates, and terminal values. There are inherent uncertainties related to these assumptions and management's judgment in…
• FY2025 10-K: …Our Intelligent Operating Solutions segment provides advanced instrumentation, software and services to tens of thousands of customers enabling their mission-critical workflows. These offerings include professional instruments used in applications including maintenance, repair, measurement and condition monitoring,…
• MIR (Mirion Technologies, Inc.)
• FY2025 10-K: …this measure of progress captures the timing of our underlying technical performance activities (engineering design, customized material assembly, quality testing, and solution integration) which can fluctuate in the timing of delivering the customer's specifically designed solution versus the original project plans.…
• FY2025 10-K: …with peer company multiples. Under the discounted cash flow methodology, the present value of expected future cash flows utilized discount rates ranging from 12 % to 14 %. The discounted cash flow used a terminal future cash flows growth rate of 3.5 % for all reporting units. The Company also compared fair value to…
• ST (SENSATA TECHNOLOGIES HOLDING PLC)
• FY2025 10-K: …but not limited to, the risks and uncertainties described in Item 1A: Risk Factors included elsewhere in this Report. Our actual results may differ materially from those contained in or implied by any forward-looking statements. Overview We innovate on behalf of our broad array of customers, solving some of their…
• FY2025 10-K: …are designated and qualify as hedges of the exposure to changes in the fair value of an asset, liability, or commitment, and that are attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivative instruments that are designated and qualify as hedges of the exposure to…
• TRMB (TRIMBLE INC.)
• FY2025 10-K: …and industry lifecycles, driving a more productive, efficient, and sustainable future. With a focus on the industries that build, maintain, and move the world, the comprehensive depth and breadth of our solutions are transforming the way the world works, making it easier for Trimble customers to focus on what…
• FY2025 10-K: …mapping services, and digital freight matching. Our competitive advantages are deep domain expertise, a long-standing trusted brand, and proprietary data that fuels agentic AI for workflow automation and superior predictive insights. By connecting shipper and carrier TMS solutions, our platform creates…
• ONTO (ONTO INNOVATION INC.)
• FY2025 10-K: …into our lithography systems to meet our customers' changing process requirements. Our metrology and inspection technologies provide process control for the majority of advanced node wafers processed today in a semiconductor wafer fab. In front-end processes, OCD metrology, thin film metrology, wafer stress metrology…
• FY2025 10-K: …wafers to improve device performance and manufacturing yields. Our end customers manufacture many types of ICs for a multitude of applications, each having unique manufacturing challenges. This includes ICs to enable information processing and management (logic ICs), memory storage (NAND, 3D-NAND, and DRAM), analog…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.