Middleby (NASDAQ:MIDD) ran hot and cold this year, but overall, it has been quite a stock. Let's take a look back over the 2006 performance for the oven maker, which provides the means for restaurant chains such as Papa John's (NASDAQ:PZZA), Wendy's (NYSE:WEN), and McDonald's (NYSE:MCD) to heat up their goods.

In the fourth quarter, Middleby's earnings improved to $7.2 million from a $660,000 loss in the same quarter the year before. Sales increased 18.1%. Despite the strong showing, shares fell 9% that day. Fool Tim Beyers pointed out at the time that it only met analysts' expectations that quarter, and its profit had beaten estimates by 9.7%, 14.4%, and 20.2% in the previous three quarters.

Middleby's first-quarter profit increased 28.6% to $8.1 million, or $0.97 per share. Sales grew 29.1% to $96.7 million. The oven maker beat expectations in the quarter.

Moving on to Middleby's second quarter, net income increased 23.3% to $11.1 million, or $1.34 per share, and sales increased 25% to $104.8 million. Again, Middleby beat expectations, and it had been working to reduce its debt. However, one thing that Middleby shareholders were paying close attention to during the summer was the company's bidding for a U.K.-based company, Enodis, which had been spurning Middleby's offers.

Middleby's third-quarter net profit increased 27% to $12.2 million, or $1.48 per share. Sales increased 28% to $103.2 million, and the company cited recent acquisitions as having contributed to the impressive sales growth. Debt decreases continued, with Middleby having decreased its debt load by 12% in the quarter.

Investor sentiment about Middleby ran hot and cold over the course of the year, but it seems to be ending 2006 on a high note given its latest quarter. Although shareholders must have been on pins and needles during Middleby's interest in Enodis, it appears that when Middleby couldn't get what it considered a reasonable price for the company, it gave up on the idea.

Middleby is a three-time recommendation for Motley Fool Hidden Gems; Tom Gardner first recommended it in November 2003, and re-recommended it in the February 2005 and October 2005 issues. Its return has been 463%, 119.78%, and 57.65%, respectively. As you can see, despite a few sell-offs and occasional moments of investor negativity over the last year, Middleby has rewarded its shareholders generously thus far.

So far, so good, right? But what does the CAPS community think of Middleby's future?


CAPS Rating
***** (out of five stars)

Total Bulls


Total Bears


Bull Ratio


Bear Ratio


Data current as of Dec. 15, 2006.

A whopping 98% of CAPS players who have rated Middleby believe it will outperform, and seeing how it's a five-star stock, you can gather that the community thinks highly of this company's prospects.

WickedSmaht's CAPS pitch in early November probably reflects the same reasons many investors are high on Middleby: "Here's why I like this stock: Solid, shareholder-friendly management; sitting on top of a growing trend of eating out/taking out; growing both organically and through smart acquisitions, never biting off more than they can chew; they just blew out expectations again in the last quarter. I missed this one when it was first recommended, and finally got in when the stock dipped on uncertainty surrounding their latest bid to take over a competitor. Now I plan to sit back and watch it go up. This is a solid long-term buy."

I find Middleby interesting because it's a company that operates behind the scenes; restaurant stocks are well known, but one hardly thinks of the machinery that makes their businesses hum in the kitchen. Although it's not entirely free of competition -- other companies, like TurboChef (NASDAQ:OVEN), also make commercial ovens -- it's obviously doing a great job of peddling its wares so far. Stay tuned in 2007 to see if Middleby can continue to bake up the great returns for investors.

If small-cap successes like Middleby sound appetizing, check out Motley Fool Hidden Gems. Tom Gardner's three-time recommendation of Middleby has helped the service return an average of 46.77%, vs. 21.66% for the S&P.

For more tasty small-cap Foolishness:

Check out the other companies featured in "The Motley Fool's 2006 in Review and 2007 Preview" special.

Alyce Lomax does not own shares of any of the companies mentioned. The Fool has a disclosure policy.