3 Reasons to Sell MIDD and 1 Stock to Buy Instead

December 06, 2024 at 03:10 AM EST

MIDD Cover Image

Middleby trades at $141.72 per share and has stayed right on track with the overall market, gaining 12.6% over the last six months. At the same time, the S&P 500 has returned 13.5%.

Is there a buying opportunity in Middleby, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

We're swiping left on Middleby for now. Here are three reasons why there are better opportunities than MIDD and a stock we'd rather own.

Why Is Middleby Not Exciting?

Holding a Guinness World Record for creating the world’s fastest conveyor pizza oven, Middleby (NYSE: MIDD) is a food service and equipment manufacturer.

1. Long-Term Revenue Growth Disappoints

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Middleby’s sales grew at a tepid 5.7% compounded annual growth rate over the last five years. This was below our standard for the industrials sector. Middleby Quarterly Revenue

2. Core Business Falling Behind as Demand Declines

In addition to reported revenue, organic revenue is a useful data point for analyzing Professional Tools and Equipment companies. This metric gives visibility into Middleby’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.

Over the last two years, Middleby’s organic revenue averaged 2% year-on-year declines. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Middleby might have to lean into acquisitions to grow, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus). Middleby Organic Revenue Growth

3. EPS Barely Growing

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Middleby’s unimpressive 6% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

Middleby Trailing 12-Month EPS (Non-GAAP)

Final Judgment

Middleby isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 13.7× forward price-to-earnings (or $141.72 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're fairly confident there are better investments elsewhere. We’d recommend looking at Wingstop, a fast-growing restaurant franchise with an A+ ranch dressing sauce.

Stocks We Like More Than Middleby

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