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Given these positive factors, the company's somewhat disappointing return on equity is no threat to the buy rating.

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Badger Meter(BMI Quote) engages in the manufacture and marketing of products using the flow measurement and control technologies developed both internally and with other technology companies. It has been rated a buy since August 2005.

The company's net income increased by 35% in the second quarter of 2007 to $5.47 million from $4.05 million a year earlier. The company's debt-to-equity ratio is below the industry average, implying successful management of debt levels. Badger has demonstrated a two-year pattern of positive EPS growth, though TheStreet.com Ratings anticipates underperformance relative to this pattern in the coming year.

These strengths outweigh the fact that the company is trading at a premium valuation according to our review of its current price compared with such factors as earnings and book value.