The company we're looking at today has seen its split-adjusted earnings per share increase nearly 20% per year over the last ten years and 24% over the last five. It has seen its net profit margin increase from 4% in 2014 to 17% in 2023.
Its earnings have increased six-fold, from $101 million to $603 million, for a compound annual increase of 20%. In the previous five years it has fared even better, clocking in average annual gains of 42% per year.
Equity has increased at a respectable 12% compound annual growth rate, and ROE is often in the high double digits (36% in 2022!).
The company is Tennessee-based Mueller Industries (MLI). Founded in 1917, it has grown to employ 4500 people. The company manufactures copper, brass, aluminum, and plastic products in the United States, the United Kingdom, Canada, South Korea, the Middle East, China, and Mexico.
Mueller has beaten earnings in each of the last four quarters, has a P/E under 10, it is expected to grow an average of 12% per year over the next five years, and it has seen its EPS revised upward last month.
There are some points of concern though. Revenue has increased a mere 4% per year over the last ten years -- the P13 method looks for companies that at least match the stock market's median 6.5% 10-year growth rate. Mueller is sub-par, and buying a sub-par stock does not seem to be a good way to get above average growth.
Not only that, but in the first five years of the previous decade both earnings and EPS barely budged -- the "10 year growth rate" discussed above is really the last five years stretched out over the previous ten. The P13 method involves looking at the last ten years to ensure the company has a long-term proven track record of growth and looking over the last five years to ensure the company is still growing; we don't want a has-been!
In the case of Mueller, the company appears to be good if you look at where it was ten years ago versus today, but when you take a closer look and realize all that growth is really just from the preceding five years, it's not really ten years worth of growth. In other words, the company does not have a long-term proven track record; it has a few lucky years.
It's certainly possible to squeeze out some gains from MLI, but it's a bit of a gamble. I'm gonna hold off for something better.
DISCLOSURE: I do not currently own the stock indicated and do not plan to buy some within 24 hours. This is not a recommendation to buy; do your own research, and plan any stock purchases with the help of a financial advisor and an eye towards your appetite for risk and your own unique financial circumstances.
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