Mueller Water Products, Inc. (MWA): A Bull Case Theory 

We came across a bullish thesis on Mueller Water Products, Inc. on Flyover Stocks’s Substack by Todd Wenning. In this article, we will summarize the bulls’ thesis on MWA. Mueller Water Products, Inc.’s share was trading at $26.71 as of January 28th. MWA’s trailing and forward P/E were 21.89 and 19.23 respectively according to Yahoo Finance.

Mueller Water Products (MWA) is a long-standing player in the U.S. municipal water infrastructure sector, with a history dating back to 1857. The company benefits from multi-decade relationships and a massive installed base, making it a go-to provider for repairs and maintenance among municipal waterworks. With approximately 240,000 water main breaks annually in the U.S. and billions of gallons of treated water lost, as well as raw sewage discharged from aging wastewater systems, the need for sustained investment in water infrastructure creates a strong secular tailwind for MWA.

Over the last decade, Mueller Water has delivered an average ROIC of 11%, rising to 15% on a trailing-twelve-month basis, reflecting a narrow moat largely tied to municipal spending. While these relationships are valuable, municipalities often drive competitive pricing, limiting ROIC expansion. MWA’s revenues are heavily concentrated in North America, with over 85% of sales from U.S. and Canadian utilities, making the company sensitive to government budgets and political priorities. A hypothetical 10% cut in municipal capital spending could translate to a similar decline in revenue, with amplified effects on earnings due to operating leverage.

Despite these risks, MWA has a strong balance sheet with only $20 million in net debt, positioning it well for continued operations and potential strategic moves. While municipal dependence introduces cyclicality, the company’s entrenched position, resilient cash flow, and critical role in maintaining municipal water systems make it a compelling long-term investment. Future catalysts could include continued infrastructure spending or potential M&A activity, contingent on how management chooses to deploy its capital.

Previously we covered a bullish thesis on Badger Meter, Inc. (BMI) by Durable Value Creators in November 2024, which highlighted the company’s leadership in smart water solutions, AMI technology, and recurring SaaS revenues. The company’s stock price has depreciated approximately by 33.25% since our coverage. The thesis still stands as BMI continues expanding its smart water ecosystem. Todd Wenning shares a similar focus but emphasizes Mueller Water Products’ municipal relationships, resilient cash flows, and exposure to infrastructure spending.

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Disclosure: None.