Middleby (MIDD +0.76%) has always been a relatively difficult business to evaluate. Its acquisitive approach leads to constantly changing and moving parts. Long-time shareholders have been well rewarded, though.
Through July 6, when it spun off its food processing unit, Middleby's stock has more than doubled the S&P 500 index's return over the past 20 years, soaring 1,150%. After this week's first earnings report since the spin-off, though, shares sank 12.3%, according to data provided by S&P Global Market Intelligence.
With a simplified structure and newly raised guidance, this week's drop looks like a great chance for investors to own Middleby.
Image source: The Motley Fool.
Unlocking value
On July 6, Middley completed the spin-off of its food processing business into a new publicly traded company, Midera Food Processing. Existing Middleby shareholders were issued shares of Midera common stock. Middleby has now become a pure-play commercial foodservice business.
Management now sees sales growing between 6% and 8% in the foodservice business this year. Its earnings per share (EPS) guidance implies a price-to-earnings (P/E) ratio of under 17.5, too. Middleby is a leader in commercial foodservice, with large global restaurant chains and retailers as customers.
NASDAQ: MIDD
Key Data Points
That P/E compares favorably to large restaurant chains, including Yum! Brands and McDonald's. It looks like investors who can sift through the nuances of the restructured company could do well to buy Middleby stock after this week's drop.
