Familiar Concerns Dogging Middleby

Even though value-oriented investors tend to approach the investment process with more patience than growth or momentum investors, timing still matters. Had I been writing this article on Middleby (MIDD) just three weeks ago, I’d probably have concluded that the shares offered a rare chance to pick up a proven (if controversial) grower at a reasonable valuation. With the third quarter results in the books, though, the shares have shot up more than 15%.

Although Middleby isn’t back at peak multiples, I’m more cautious on the shares with that recent run. There are still growth issues here, and I’m not fully convinced that the Commercial Foodservice and Residential businesses are in the clear. There are still ample growth opportunities for Middleby, but Welbilt (WBT) seems to be performing better than it has in recent years and it’s tough to make the cash flow numbers work unless you’re willing to accept what I believe is a relatively low required rate of return given the risks in the business model.

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Familiar Concerns Dogging Middleby