5/11/25
Paul Mueller (MUEL) is a company that manufactures innovative stainless steel processing equipment.
(h/t Maj Soueidan of GeoInvesting)
Here are the industries that MUEL currently serves:
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- Dairy farming
- Biotechnology
- Process cooling
- Food processing
- Beverage processing
- Chemical processing
- Thermal energy storage
- HVAC and heat recovery
- Water purification/distillation
- Pharmaceutical manufacturing
- Industrial tank and vessel fabrication
- Specialty transport and logistics (contract carriage)
The company has had a high cash balance and virtually no debt for years. MUEL recently started buying back stock at a P/E of 8 or lower. Its first buyback was completed in April 2024 at $80 for $15 million. The buyback recently announced is for $15 million at $250.
But the company still has $55.3 million in cash and only $6.9 million in debt.
The company has little exposure to tariffs, as most of its activities are based in the United States, including recent facility expansions. (But they do have a manufacturing facility in Vietnam.)
MUEL just reported Q1 2025 EPS of $5.26, up from $4.10 a year ago. Sales climbed to $58.9 million from $50.4 million. Q1 is usually the company’s seasonally weakest quarter.
Q4 2024—reported a couple of weeks ago—showed EPS of $11.89 vs. $4.32 in Q4 2023. Q4 2024 revenue was $70.4 million vs. $55.7 million in Q4 2023.
More importantly, according to the Q1 2025 report, MUEL’s backlog jumped to $254.5 million, nearly tripling from $95.2 million one year earlier. This is MUEL’s highest backlog in years.
If we translate the backlog into earnings, we get about $42 in EPS, or a forward P/E of 6.9.
One major component of the backlog is a newly announced $120 million pharmaceutical contract, which will be fulfilled through 2026. This is part of the company’s strategy to enter new growth markets.
Furthermore, in addition to the $30 million stock buyback, MUEL has launched three capacity expansions in 18 months, adding 131,000 square feet to its manufacturing operations. This includes a $17.9 million project in April 2025, part of the company’s goal to modularize production by pre-assembling large units.
According to the company, the modular assemblies shift complex construction from the customer’s site to MUEL’s controlled manufacturing environment and result in:
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- Reduced risk: Building and testing large equipment modules in-house minimizes surprises. On-site construction in industries like pharma often involves tight space, regulatory scrutiny, and coordination with ongoing operations. By delivering fully assembled, tested units, MUEL lowers the chance of installation delays, compliance issues, or costly errors.
- Faster implementation: Modular systems arrive ready to go. Instead of weeks or months of assembly at the customer’s location, installation becomes more like plug-and-play. That translates to shorter project timelines, quicker regulatory signoff, and faster time-to-value for the client.
In the 2024 shareholder letter, CEO David Moore explained the advantages of its new modular assembly capabilities:
The modular assembly of processing equipment allows us to set the vessels, heat exchangers, piping, and controls into structural frames shipped to the customer and installed as one module, reducing the time and risk required to assemble this equipment at the customer’s site. This method is popular in the pharmaceutical industry, where the largest modules are known as superskids, but this practice has applications in other industries we serve.
Moore adds:
The current backlog, combined with investments in equipment and talent, puts the Company in a strong operational and financial position.
Moore concludes:
By producing components like tank heads, manways, heat exchangers, and machined parts in-house, fabricating a wide range of vessels, and performing modular construction in our factory, we significantly reduce the number of vendors, risks, and costs for our customers.
The market cap is $269.8 million while enterprise value is $221.4 million.
Here are the metrics of cheapness:
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- EV/EBITDA = 5.05
- P/E = 8.95
- P/B = 3.19
- P/CF = 4.92
- P/S = 1.05
For a company with MUEL’s growth prospects—based on its capacity expansions and its backlog—these metrics are quite low.
Insider ownership is 7.7%, which is decent (worth over $20 million). ROE (return on equity) is 39.7%, which is excellent. The Piotroski F_Score is outstanding at 8.
As noted, the company has $55.3 million in cash and only $6.9 million in debt. And TL/TA (total liabilities to total assets) is 50%, which is pretty good.
Intrinsic value scenarios:
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- Low case: If there’s a bear market or a recession, the stock could decline temporarily. That would be a buying opportunity.
- Mid case: The forward P/E is 6.9 but should be at least 16. This translates into a share price of $667.83, which is over 130% higher than today’s stock price of $288.
- High case: Arguably, the forward P/E should be 20. This translates into a share price of $834.78, which is 190% higher than today’s stock price of $288.
RISKS
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- As noted, there could be a bear market or a recession that would likely drive down the stock price temporarily.
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