Editor's note: A previous version of this article gave an incorrect figure for the amount of debt Middleby would have if the TurboChef acquisition goes through. That mistake has been corrected.
Perennial Motley Fool Hidden Gems pick Middleby
In the midst of a global recession, Middleby grew its sales 22%, and its earnings per share 16%. And while cynics (right here! [waves hand]) may point out that all of the growth came from acquisitions, that caveat may not be as significant as it seems.
You see, recessions get a bad rap. For many companies, they're very bad news indeed -- witness Circuit City's bankruptcy filing yesterday, Ford's
Oven maker Middleby, as you know, faces significant competition from several strong shops, with Illinois Tool Works
Avoid foreclosure! Will buy your business for cash!
Which is precisely what Middleby's been up to lately. Over the past year, it's snapped up five smaller firms, and is now ready to chow down on its sixth course -- rival oven maker TurboChef
Already, a stock that Hidden Gems recommended in large part based on the strength of its balance sheet is now in hock to the tune of nearly a quarter-billion dollars. The TurboChef deal, if it goes through, will push that total close to $360 million.
I hesitate to be the Fool to question CEO Selim Bassoul's business acumen, and his ability to balance all this debt on the tip of his balance sheet in the midst of an economic storm. But I'm a saver-not-a-spender myself, and I must admit that all this debt makes me nervous.
But I'll give Bassoul the benefit of the doubt as long as he shows he can keep the cash rolling in (and he has -- free cash flow is up 37% year to date), and roll it out as quickly to pay down debt (and he is -- long-term debt dropped $17 million over the past three months).
Just how hot is Middleby? Read on and find out: