In theory, successful stock investing hinges on a single, simple premise: buy low, sell high.

If only it were that easy. In the real world, knowing when a stock is truly undervalued or overvalued  can be terribly difficult, even with the cache of valuation metrics that investors have at their disposal.

Take The Middleby Corp. (Nasdaq: MIDD), a prominent worldwide food service equipment supplier with roughly $1.7 billion in annual revenue. During the past 15 years, Middleby’s stock rose more than 8,300%. Recent gains have pushed the price-to-earnings (P/E) ratio to 31, which is about 10 points higher than the S&P 500’s earnings multiple.

Thus, it might seem safe to conclude that Middleby has run its course, at least for now. After all, this is a company that makes everyday commercial and residential kitchen appliances, like foodwarmers, ovens, cooktops and refrigerators. With its roots in such a mundane industry, how much higher could its stock be expected to rise from current levels?

Actually, several catalysts portend substantially higher stock prices in the coming years. These include a knack for acquiring state-of-the-art innovations that complement a growing product portfolio. Earlier this year, for example, Middleby purchased New Jersey-based oven manufacturer Marsal & Sons, Inc., which had developed rapid-cook ovens that can churn out a pizza in 90 seconds.

Marsal was relatively small at the time of the acquisition, with annual revenue of only about $5 million. But Middleby’s superior scale and close connections with restaurant chains and other major food service operations should translate into substantially greater long-term sales. Marsal is now part of Middleby’s largest business segment, commercial food service, which accounts for 64% of revenue.

Earlier this month, the company’s foodservice segment got a boost through the acquisition of Induc Commercial Electronics Co. Ltd. The China-based firm’s portfolio of steamers, wok ranges and other induction cooking equipment is expected to produce sales synergies with Middleby’s existing induction brand. There’s brisk demand for such equipment because it’s more energy efficient and offers precision heat control.

Other key recent acquisitions in the commercial segment include several top manufacturers of chilling and freezing technologies (e.g. refrigerators, freezers, blast chillers and wine storage); a leading provider of commercial beverage dispensing systems; and a supplier of unique steam cooking equipment. Revenue for these companies ranged from $15-to-$60 million at the time of acquisition.

#-ad_banner-#Not all of the company’d deals have gone smoothly. A 2013 buyout of premium kitchen equipment maker Viking Range Corp. has been more challenging than anticipated due to unforeseen product quality issues and unexpected costs for recalls. Also, revenues have been temporarily held back by non-core product discontinuations, the culling of Viking dealers who can’t deliver healthy margins and production delays involving a new line of high-end refrigerators for the residential market.

However, Viking is now hitting its stride and should give both the commercial and residential businesses a major boost in the coming years. On the commercial side, Viking has long been a prolific kitchen equipment supplier and boasts such high-profile customers as Starbucks Corp. (Nasdaq: SBUX), Papa John’s International, Inc. (Nasdaq: PZZA) and Domino’s Pizza, Inc. (NYSE: DPZ).

Major fast-food and fast-casual chains should continue to show especially robust demand. In many cases, Viking equipment will be an integral part of massive restaurant overhauls aimed at maintaining a fresh image and keeping facilities functioning at peak efficiency. Hotels, full-service restaurants, convenience stores and institutions have historically been solid revenue sources for Viking, too. They should remain so because of the periodic need to equip new locations or upgrade existing ones.

Along with several other top brands, Viking is helping Middleby conquer the vast residential kitchen market, particularly the more lucrative higher end. With its premium ovens, refrigerators and other appliances, Middleby had little presence in the residential market a few years ago, but is now at a $273 million annual run rate — and growing.

Current residential sales represent only 17% of Middleby’s total, but look for that figure to grow as the domestic housing market rebounds and rising wealth in many developing countries stirs demand for high-end kitchens. Viking will likely lead the segment forward, with projected sales of $450 million annually within a couple of years, from around $200 million when the company was acquired by Middleby.

Despite a rapid pace of acquisitions, Middleby is financially sound. Debt is well below the industry average and margins are well-above average. Annual free cash flow has been rising for a decade and currently stands at a record $255 million.

Notably, the firm has a third segment that offers batch ovens, slicers, grinders and other processing equipment for pre-cooked meat products and baked goods. At present, this operation accounts for about the same proportion of total revenue as the residential segment. But growth has slowed to a high-single-digit pace, compared with mid-to-high teens for the other two segments.

As the commercial and residential segments are making such rapid headway, analysts project overall earnings growth well north of 20% annually for Middleby over the next five years. Thus, the stock has a PEG ratio of only about 1.1.

The PEG, which is the P/E ratio divided by projected earnings growth rate, can give a clearer sense of a stock’s value than a straight P/E. In Middleby’s case, the PEG ratio indicates that investors must pay a relatively small premium for what should be exceptional growth. It also means that Middleby’s stock is much more reasonably priced than a P/E of 31 would suggest.

Risks To Consider: Middleby could begin to display more earnings volatility as the residential segment expands and increases the company’s exposure to housing market cycles.

Action To Take –> Despite a high P/E ratio, one the best growth stories of the past 15 years is still a “buy.” Indeed, the Middleby Corp. boasts considerable financial strength, ample liquidity and powerful catalysts. Focusing mainly on high-end consumers should provide some protection from any weakness in the housing market and the overall economy.

If you’re looking for more growth stories, then let my colleague Andy Obermueller be your guide. He devotes his time to identifying game-changing trends and the companies that should benefit. His research has led readers to 23 investments that went on to gain triple-digits over the last four years — not to mention his numerous double-digit winners.

More recently, Andy has been talking about the profit potential for Apple’s newest technology Apple Pay — and more importantly the company’s key suppliers. If you haven’t heard about this opportunity yet, then I urge you to check out his comprehensive report on how to profit from this technology, by clicking here.