Badger Meter's stock drops 16%, remains attractive for investors

The stock market has recently seen a downturn, with the S&P 500 dropping around 8% from its peak last month. Many stocks, including some strong companies, have fallen sharply in value. One such company is Badger Meter, which is down 16% from its highs in late 2024. Despite this dip, Badger Meter has a solid track record of outperforming the market. Badger Meter is a leading provider of water management solutions in North America. The company offers various services for measuring water flow and quality, as well as software solutions that help utilities analyze their data. As it approaches its 120th anniversary, Badger Meter aims to modernize outdated water infrastructure through its technology-focused services. The company recently made a significant acquisition of SmartCover for $185 million. This purchase makes Badger Meter a leader in wastewater monitoring in the U.S., holding a market share of about 50%. The acquisition is expected to provide new opportunities for growth as utilities seek to upgrade their systems. In addition to expanding its services, Badger Meter is seeing increased profitability due to its shift towards software solutions. These higher-margin products have improved the company’s operating margins and return on investment. Over the last six years, its software sales have grown by 28% annually. Badger Meter has also raised its dividend by 26% this year, marking 32 consecutive years of dividend increases. Its current yield is low at 0.7%, but the company has room to grow dividends in the future. Investors who bought in 2000 would see a substantial return on their investment today. While Badger Meter is currently trading at higher valuations, its strong market position and improving profitability make it a compelling stock for investors during this market correction.