$50.90
$98.90
bear $50.90
base $93.10
bull $98.90
margin of safety $35.00
market price* $107.78
WHAT THE SHARES NOW REPRESENT. Middleby makes commercial kitchen equipment for cooking, warming, holding, refrigeration, freezing and beverage applications under brands such as Pitco, Blodgett, Southbend, Taylor, TurboChef, Viking Commercial, Follett and Lincat. It sells mainly through independent dealers and distributors and directly to some large restaurant chains. The company is much smaller than a year ago. On February 2, 2026 it sold 51% of its residential kitchen business for net cash proceeds of $564.6 million (subject to closing adjustments), keeping 49% and holding a $135.0 million note from that business. On July 6, 2026 it spun off its food-processing division as a separate listed company, Midera (MFP). We value only what remains: the commercial foodservice business, which had 2025 sales of $2,351 million - 71.5% from the United States and Canada, 15.8% from Europe and the Middle East, 9.1% from Asia and 3.5% from Latin America. EARNING POWER. We measure the cash a business produces for its owners: operating cash flow with the swings in working capital taken out, less stock compensation and the equipment spending needed to stay in business. For the company as reported at the time (including divisions it no longer owns) that came to $6.06 per share in 2016, $7.30 in 2019, $5.36 in 2020 when restaurants shut (down about 27% in total as revenue fell 15%), $9.36 in 2021, $9.58 in 2024 and $9.14 in 2025. Those figures describe a bigger company with more shares, so they are history rather than a forecast. For the remaining business we took the consolidated figures and removed the food-processing division, estimating its cash earnings from its reported segment profit, an assumed 25% tax rate and its capital spending. That puts the remaining business's cash earnings before payments to lenders at about $460 million in 2023, $485 million in 2024 and $490 million in 2025. As a cross-check, using Midera's own reported 2024 net earnings ($122.3 million) for the division instead changes the 2024 figure by less than 1%. We use $485 million, the middle of the three years, as the normal level. 2025 was helped by lower cash taxes ($79.1 million versus $108.7 million in 2024 and $131.9 million in 2023, for the company including the division now spun off) and by stock compensation of only $13.5 million (versus $31.9 million in 2024 and $45.2 million in 2023), so the middle year is a fairer guide than the latest. The company's own segment profit for commercial foodservice fell from $691.6 million in 2023 to $654.5 million in 2024 and $626.7 million in 2025, while the cash figure did not fall; in our judgment the lower cash taxes and lower stock compensation account for much of that difference (deferred income tax expense was $70.1 million in 2025 versus $35.8 million in 2024), and we could not tie the larger deferral to a specific cause in the filing. Growth check: cash earnings of the remaining business grew about 1.0% in 2025 on our estimate ($490 million versus $485 million), while the segment's sales fell 1.2% and its segment profit fell 4.2%. Our base case therefore starts at +1.0% in year one, not higher. Early 2026 does not yet justify more: the segment's order backlog was $260.4 million at January 3, 2026 versus $265.3 million a year earlier, and in the first half of 2026 consolidated sales (including the division since spun off) rose 12.3% but operating income rose only 1.4%, to $281.1 million from $277.3 million, including separation costs. THE THREE CASES. All three start from the remaining business's cash flow before lenders and then subtract net borrowings. Per-share figures use about 45.3 million diluted shares. Base - $93.1 per share. Cash flow is about $490 million in year one, then flat in dollar terms for 15 years, then declining in a straight line to zero over the following 15 years. The business is worth about $5.83 billion ($128.7 per share), it owes about $1.61 billion net ($35.6 per share), leaving $93.1. What supports flat: a ten-year record in which cash earnings per share never fell below $5.36 even through the 2020 shutdown, segment profit margins (the company's own measure) of 26.7% to 27.8% in 2023-2025, and sales in over 100 countries through a dealer network. What we left out: any growth from acquisitions (the company spent about $3.5 billion on acquisitions over 2016-2025, including $1.2 billion in 2018 and $964 million in 2021, but its residential business produced a $645.0 million loss from discontinued operations in 2025 and we cannot show the purchases earned adequate returns), price increases, a recovery in restaurant equipment orders, future share repurchases, and the retained 49% stake in the residential business (carried at $109.7 million, with about $28.9 million of losses recorded from it so far this year) and the $135.0 million note (carried at $86.9 million). The stake and note are unvalued upside. Bull - $98.9 per share. Commercial foodservice profit returns to its 2023 level, which is 5.7% above 2024: cash flow rises 3.0% in year one and 2.7% in year two, to about $513 million, then follows the same 15-year flat and 15-year fade. The business is worth about $6.09 billion ($134.5 per share), it owes $1.61 billion net ($35.6 per share), leaving $98.9. We do not credit acquisitions or growth beyond that, because no growth beyond a return to a level the business already reached is secured. Bear - $50.9 per share. Three named pressures: (1) the segment's profit has fallen two years running (down 9.4% from 2023 to 2025; sales down 4.2% in 2024 and 1.2% in 2025), and the annual report says tariffs have raised the cost of certain raw materials and components and that offsetting them is not assured - we assume cash flow falls 5% in year one and settles 10% below the normal level from year two; (2) a downturn like the 2020 shutdown arrives in year three - in 2020 revenue fell 15.1% and cash earnings fell 27.3% - so cash flow drops 27.3% below the lowered level in year three and sits 15% below it in year four, then returns to the lowered level; (3) the company keeps spending about $60 million a year on acquisitions (its 2023-2025 average) that earn nothing for ten years, which is a repeat of the residential experience, and the franchise erodes sooner: flat for ten years, then fading to zero over fifteen. After that spending the business is worth about $3.92 billion ($86.5 per share), it owes $1.61 billion net ($35.6 per share), leaving $50.9. In the worst year (year three) the bear case still produces about $257 million of cash before lenders after the acquisition spending, about 2.8 times an interest bill we estimate at roughly $91 million. DEBT. The latest balance sheet (July 4, 2026) predates the spin by two days, so net borrowings after the spin are our estimate: the consolidated July 4, 2026 balance sheet ($1,979.5 million of borrowings, $159.2 million of cash) less the $258.6 million of debt and $50.5 million of cash Midera reported at the same date, which leaves about $1,721 million of borrowings and $109 million of cash, or about $1,612 million net. Midera borrowed $228.0 million under its new credit facility before July 4 and, with cash on hand, paid Middleby $233 million in connection with the spin; Middleby said it expected to use that cash to repay part of its debt. Cross-check: the company estimates its leverage under its credit agreements at 2.7x after the spin, which on its bank EBITDA of $787.7 million less Midera's estimated standalone EBITDA of $154.8 million implies roughly $1.7 billion - in the same range. If our figure were $100 million too low, every case would fall by about $2.20 per share. In the first half the company received $564.6 million of residential sale proceeds and also repurchased $581.9 million of its own shares. From the annual report: the main credit facility matures April 28, 2028 (extendable in one-year steps with the consent of the extending lenders), borrowings are secured by substantially all assets of Middleby Marshall, the company and its domestic subsidiaries, the average rate on the facility including hedges was 4.68% at January 3, 2026, and the covenants require interest coverage of at least 3.00x and a secured leverage ratio (funded debt less unrestricted cash to EBITDA) of no more than 3.75x (4.25x for qualified acquisitions); the company was in compliance at that date. We have not reviewed any changes to these terms made around the separation. Not reconciled from the filings: the exact post-spin debt split, the division's precise cash earnings (our estimate), and the cause of the larger 2025 tax deferral. The previous estimates we published (September 2026) were built on a different basis and are not comparable; what has changed in the business since is that the separation is now complete and Midera has reported its own debt and cash, which lets us calculate net borrowings rather than guess them. MARGIN-OF-SAFETY PRICE - $35. How sure are we of the earnings level? Reasonably, not highly: the three years we use span $460 to $490 million (a 6.6% range), but they rest on our own separation of the spun-off division, and the segment's profit has fallen two years running. The worst plausible outcome is a 2020-style shutdown on top of a lasting profit slide, with about $1.7 billion of borrowings (nearly all of the company's debt at the end of 2025 was due in 2028) and a management that put $581.9 million into buybacks in six months; the bear case covers its interest even in the worst year, but only if cash is not diverted into more buybacks or acquisitions. If we are wrong about the two things we are most likely to be wrong about: if the business earned the base-case cash flow for only ten years and nothing after, the shares would be worth about $44; if the level is also 10% lower, about $36. The price assumes a holding period of about three years. The company pays no cash dividend, so the return comes from retained cash reducing debt: in the bear case net borrowings fall from $1.61 billion to about $847 million over three years if all retained cash goes to debt, and the shares would then be worth about $59.9, implying a 19.6% annual return from $35; in the base case they would be worth about $109.7 (about 46% a year). The margin-of-safety price is $35 because from that price even the bear path implies about 20% a year, and it is just below the roughly $36 value in the case where both of our main judgments prove wrong.