Recently, I published a piece on an otherwise healthy market sector that has been left out of the current rally for no particular reason. In identifying this, I stumbled onto a great brand name that’s trading at a bargain.

In addition to owning a high-quality stock, investors can also participate in the extended U.S. economic recovery as well as the larger theme of the growing middle class in emerging markets. The company is literally a household name: major appliance manufacturer Whirlpool (NYSE: WHR).

While the stock is poised to, hopefully, finish the year in the black, the price action has definitely been through the spin cycle, with shares underperforming the broader market. The main culprit is back-to-back quarterly earnings per share (EPS) disappointments. 

The company delivered quarterly results that missed the consensus estimates by an average of 3.25% for the second and third quarters of 2017. The result was an 18.5% haircut from the stock’s 52 week high.

#-ad_banner-#But despite the herd’s typical reaction, Whirlpool’s future is hardly bleak. Here’s why…

It’s All About Foreign Markets
Just 48% of Whirlpool’s revenue comes from the United States. This means more than half of the company’s sales come from overseas. According to Statista.com, global consumption of household appliances will grow from $526.08 billion currently to $588.83 billion by 2020. 

The primary driver is, of course the growing global middle class. As emerging-market economies continue to grow, more and more people are lifted out of poverty and become true consumers. In just the dryer segment of appliances, Whirlpool currently claims 14.9% of total global market share. 

According to the Brookings Institute, five people enter the global middle class every second, so it would seem that the company is poised to grow that number.

Fundamentals Remain Solid
Despite the subdued outlook for the company, the numbers aren’t that dismal. 

Whirlpool has managed to grow EPS at an average annual clip of 24% over the last five years, with sales growing at an average annual rate of 2.16% for the same period. EBITDA (earnings before interest, taxes, depreciation, and amortization) margins have increased at an average annual rate of 7.2% to an impressive 9.8%. 

However, the most impressive number I found are those concerning the value the company is returning to shareholders. Net income available to common shareholders has more than doubled over the same five-year span from $401 million to $888 million, which translates to an annual growth rate of 24.2%. The result is a stellar dividend growth rate of 19% a year for the past five years.

So why has the market soured on the stock? The same reason the market punishes just about any stock: short-term thinking. Consensus shortfalls, cautious language from management and the announcement that the company was ending its century-long relationship with Sears (Nasdaq: SHLD) was enough to spook the herd. 

Looking at the long game, though, I would say the odds are in Whirlpool’s favor, especially with U.S. economic recovery chugging along.

Risks To Consider: One area of caution management expressed was raw material price inflation. An increasingly healthy U.S. economy could possibly generate real inflation, especially on the materials end, thus squeezing the margins of large manufacturers like Whirlpool. 

While this fear is genuine, it’s more than likely a little overblown. Inflation hawks have been scouring the landscape for REAL inflation and have come up short. That’s not to say it doesn’t exist or couldn’t materialize. But the amount of liquidity pumped into the financial system during the Financial Crisis will take a long time, perhaps multi-decades, to be absorbed. The translation is low inflation for a while.

And the Sears-Whirlpool break-up? It’s a non-event. Sears represents barely 3% of the Whirlpool’s U.S. sales. They’re a smart company. They’ll find it elsewhere.

Action To Take: Whirlpool’s most exciting prospect lies in the continued growth of the world’s emerging middle-class consumer. This is a huge demographic phenomenon which will take many years to play out. But few things say “upward mobility” like new appliances, and Whirlpool happens to be one of the globe’s most recognized brands. The company is poised to reap the profits of that trend. Investors must believe in a long game.

WHR currently trades with a forward P/E of just 11.9 and an attractive 2.7% dividend yield. If the company continues to execute consistently as it has, an expansion of the P/E to 14 is reasonable. The result would be a 12- to 18-month price target of $194, which would reward shareholders with a 20% total return (including dividends). 

Editor’s Note: We’re sitting on a collection of the safest, most generous monthly payers available. And while $11,200 in dividend checks is a welcome addition to anyone’s income, investors also love racking up capital gains as high as 446%. Start generating a 10%-plus income stream for life today from these consistent companies.