2024-02-22 15:01:19 ET
Summary
- MLI achieved extraordinary profit growth driven by spikes in copper and aluminum prices, but there was no organic growth.
- Despite acquisitions, revenue only grew at 7.5 CAGR, making it a cyclical rather than a high-growth company.
- The company is financially strong and a cash cow, but there is no margin of safety based on performance over the cycle.
Investment Thesis
Mueller Industries, Inc. ( MLI ) achieved extraordinary profit growth over the past 8 years. Accordingly, its average returns as measured by the ROE over the past 3 years were more than double the 2016 to 2018 average ROE.
But these growths were driven by extraordinary copper and aluminum prices over the past 3 years. Ignoring these price growths, there was no organic growth. Growth seemed to be from its acquisitions. The overall impact is that revenue only grew at 7.5% CAGR. This is not a high-growth company but a cyclical one....
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Mueller Industries Benefited From Extraordinary Product Price Spikes, But These Are Coming Down And So Will Its Performance