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Research Report

Buffett-inspired portfolio gives high marks to this cooking equipment maker Add to ...

Validea’s pick of the week provides a detailed report on a company that scores well in the stock-screening service’s model portfolios. On Validea.ca, investors can analyze 1,000 Canadian stocks through 12 different guru-based models and get individual reports on each company. Globe Investor has a distribution agreement with Validea.ca. Try it.

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Commercial cooking equipment manufacturer The Middleby Corp. was a pretty amazing growth story 10 to 15 years ago. From 1998 to late-2002, Middleby more than doubled its market share in the U.S. commercial cooking equipment market, from 11 per cent to 26 per cent, according to U.S. Business Review. That helped the stock become one of the best-performing stocks of the 2000s, with its shares jumping about 1,700 per cent. Its market cap is $5-billion (U.S.).

The company has grown earnings at a 23-per-cent pace over the long term (using an average of the 3-, 4- and 5-year EPS growth rates), which the Peter Lynch based model likes. It has grown sales at a 21-per-cent pace over long-term, (using an average of the 3-, 4-, and 5-year sales growth rates).

Middleby gets strong interest from the Warren Buffett-based model, in part because it has increased EPS in all but one year of the past decade. The Buffett model also likes its 23.6-per-cent 10-year average return on equity and 17.8-per-cent return on retained earnings over that span.

Debt/equity ratio (68 per cent) comes in below the Lynch model's 80-per-cent limit

The company grew EPS at a 30.4-per-cent rate last quarter, helping it get some interest from the Momentum Investor model. The momentum model also likes its 85 relative strength (12 month) and 21-per-cent return on equity (12 month).

The company gets some interest from the Martin Zweig-based growth model, which likes that growth is not only high but accelerating - EPS grew at a 30.4-per-cent rate last quarter, up from an average of 24.6 per cent in the previous 3 quarters, which was up from 23.3 per cent long term.

Middleby also has a stellar 65.7-per-cent return on capital, using the EBIT/total capital employed metric the Joel Greenblatt-based model uses.

John Reese is long MIDD.

 

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