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This Week's Bonus Story Why Institutions Keep Buying Badger Meter After the Big DropAuthor: Thomas Hughes. Article Posted: 1/30/2026. 
What You Need to Know - Badger Meter is set up to rebound robustly by year's end as growth underpins cash flow and capital returns.
- Institutions are accumulating this stock and are likely to accelerate activity with shares near long-term lows.
- Valuation and analyst forecasts suggest a 50% increase in the stock price is possible.
Valuation concerns capped gains for Badger Meter (NYSE: BMI) stock in 2025, and subsequent events pushed the market into a correction that now appears overextended and poised to rebound. Although valuation was a concern, the roughly 40% decline in the share price has brought market expectations back in line with the company's fundamentals — and those fundamentals look solid. Trading near long-term lows, the stock is now valued at less than 20X its 2030 earnings, a multiple that prices in sustained earnings growth and implies the potential for a roughly 50% recovery in the coming quarters. Some analysts are revisiting historical monetary resets and the role gold has played when governments faced large debt imbalances.
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Badger Meter's long-term outlook, reaffirmed in the Q4 2025 earnings release, calls for sustained high-single-digit revenue growth, annualized margin expansion, and robust free cash flow conversion. Management expects that high-single-digit top-line growth combined with margin expansion will drive a mid-teens compound annual growth rate in earnings and cash flow, while forecasting free cash flow conversion above 100%. Badger Meter: Free Cash Flow, Capital Returns, and Accumulating Institutions The free cash flow conversion is a key differentiator for this mid-cap company. Badger Meter is profitable, growing cash flow through revenue leverage and margin improvements, and can deploy that cash to return capital to shareholders. Capital returns may not be market-beating, but they are predictable and expected to grow. Dividends are running near 30% of the 2026 earnings forecast, the balance sheet is strong, and share buybacks are being used to manage the share count. Buybacks are sufficient to offset share-based compensation and have helped keep the diluted share count on a downward path — one reason long-term investors may want exposure. Institutional activity highlights the value present in this profitable, dividend-paying growth story. Institutions own roughly 90% of the stock and, on balance, increased purchases every quarter in 2025, ramping buying activity at year-end and continuing the trend into early 2026. That accumulation provides a solid support base and underpins the case for price appreciation in upcoming quarters. The Q4 release may not have ignited broad retail buying, but it did nothing to weaken the capital-return outlook — if anything, it reinforced it. Given the trends, institutions may well accelerate their accumulation. Badger Meter Falls After Mixed Results Badger Meter reported a solid quarter: revenue rose 7.6% to just over $220 million but missed the consensus estimate, leaving some investors underwhelmed. There were bright spots, however, including strength with utility customers and continued adoption of smart-water technologies, both expected to support growth in the year ahead. The company expanded operating margin by nearly 50 basis points, which helped drive strong bottom-line performance despite the top-line miss. GAAP earnings increased about 10% versus 7.6% revenue growth and outperformed consensus by nearly 200 basis points, enabling balance sheet improvement alongside higher R&D, capital expenditures, and capital returns. Badger Meter's balance sheet shows no red flags and offers incentives for ownership. The company reported a slight reduction in cash and current assets, offset by higher total assets and lower liabilities. The net result was an approximately 17.5% increase in shareholder equity and persistently low leverage. Management funds R&D and acquisitions from cash flow and existing cash, the company has no debt, and total liabilities are roughly 0.35X shareholder equity.
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