Top 30 Rational Formula Stocks 6/27/25 -Highlighting Burnham Holdings $BURCA
Each week, I share the top-ranked companies from my Rational Formula ranking system. It’s inspired by the logic behind Greenblatt’s Magic Formula, but built with far greater depth, evaluating companies across 96 factors. The system looks for accelerating fundamentals, efficient capital allocation, expanding margins, and reasonable valuations, with a focus on consistency and improvement across multiple time frames. The goal is to generate a list of high-probability opportunities before they attract broader attention. I also highlight one company each week, sometimes as a deep dive, sometimes just an introduction. That write-up appears below the rankings.
Alphabetized Company List for 6/27/25
(All market caps in millions — CAD for Canadian tickers, USD for U.S.)
ACFN:USA – Acorn Energy, Inc. – $43.8M USD
ADW.A:CAN – Andrew Peller Ltd. – $223.5M CAD
ATGN:USA – Altigen Communications, Inc. – $15.5M USD
AVAH:USA – Aveanna Healthcare Holdings, Inc. – $948.2M USD
BKTI:USA – BK Technologies Corp. – $194.5M USD
BURCA:USA – Burnham Holdings, Inc. – $112.1M USD
BUKS:USA – Butler National Corp. – $100.1M USD
CRAWA:USA – Crawford United Corp. – $172.3M USD
CRRX:CAN – CareRx Corp. – $183.5M CAD
DR:CAN – Medical Facilities Corp. – $299.1M CAD
EHAB:USA – Enhabit, Inc. – $475.6M USD
FTG:CAN – Firan Technology Group Corp. – $298.2M CAD
GEO:CAN – Geodrill Ltd. – $167.8M CAD
GLGI:USA – Greystone Logistics, Inc. – $35.8M USD
GRC:USA – The Gorman-Rupp Co. – $954.8M USD
IFX:CAN – Imaflex, Inc. – $67.1M CAD
KLTR:USA – Kaltura, Inc. – $308.5M USD
KMDA:USA – Kamada Ltd. – $452.0M USD
MUEL:USA – Paul Mueller Co. – $284.0M USD
NATR:USA – Nature's Sunshine Products, Inc. – $274.2M USD
NEPH:USA – Nephros, Inc. – $44.5M USD
NTWK:USA – NetSol Technologies, Inc. – $34.3M USD
NOW:CAN – NowVertical Group, Inc. – $59.3M CAD
OCC:USA – Optical Cable Corp. – $22.5M USD
PERF:USA – Perfect Corp. – $218.0M USD
RCMT:USA – RCM Technologies, Inc. – $172.1M USD
RFIL:USA – RF Industries Ltd. – $60.3M USD
SNCR:USA – Synchronoss Technologies, Inc. – $70.5M USD
TOMZ:USA – TOMI Environmental Solutions, Inc. – $21.2M USD
ZDGE:USA – Zedge, Inc. – $55.8M USD
This Week’s Highlight: Burnham Holdings (BURCA)
Introductory Note
One of the simplest ways to improve your investing results is to combine a quantitative system with high-quality research that’s already available online. You start with a strong filter, find a company worth learning about, and lean on trusted analysis to make sense of it.
This post is a case study in that process.
Burnham Holdings BURCA has ranked near the top of the Rational Formula system since early 2023 (same time as a new CEO took over). Earlier this year, an excellent Substack post by Salmon Writer laid out the full thesis. After that post went up in February, the stock moved from $14 to $24.
This write-up builds on work from a sharp analyst who spotted the situation months ago. It shows what can happen when a company ranks highly in the system, gets discovered, and follows through with strong execution. What follows is a look at how the story has developed and a few added observations from my end.
Even though the stock has recently rallied significantly, it still ranks near the top of the system. On average, companies with this kind of profile tend to perform well over time.
Burnham Holdings Snapshot
Burnham Holdings is a collection of HVAC businesses focused on heat and hot water systems. Its core products, boilers, furnaces, and heat pumps, are sold under brands like U.S. Boiler, Burnham, and Bryan Steam. The company serves both residential and commercial markets, with about 70–75% of revenue coming from residential replacement projects. Most units are distributed through contractors and wholesalers, not direct to consumers, and the bulk of demand comes from system replacements rather than new construction.
Burnham is vertically integrated. It manufactures castings internally through its Casting Solutions division and manages installation and service through CSI Services. The company also operates Thermal InMotion, a mobile boiler rental business that serves industrial and institutional clients, and has been growing quickly. In May 2025, Burnham sold two non-core divisions, Norwood Manufacturing and Thermo Pride, for $27.6 million, part of a push to streamline operations and focus on higher-margin businesses.
Industry Tailwinds
Roughly 80–85% of Burnham’s sales come from equipment replacements. When a heating system fails, it typically needs to be replaced quickly, and the decision is made by the contractor, not the end customer. That creates a durable demand cycle driven more by reliability and availability than by price.
That replacement cycle is also getting shorter. Historically, HVAC systems lasted about 20 years. Higher-efficiency units now wear out faster, with the current average closer to 16.4 years. That compression increases the volume of replacement demand.
Inflation has accelerated this shift. Repair costs have risen faster than replacement costs, especially once energy savings are factored in. For many customers, swapping in a new system now makes more sense than trying to keep an old one running.
The replacement wave has only begun. Between 2015 and 2022, over 54 million HVAC units were shipped in the U.S., nearly all of which will reach end-of-life within the next 5–10 years. That backlog sets the stage for steady baseline demand across the next decade.
The replacement-driven model helped stabilize results during economic downturns. Revenue remained relatively resilient during the 2008 recession and recovered quickly after a temporary pullback during COVID, when 2020 sales declined by about 12%.
Burnham also stands to benefit from the ongoing shift toward electrification. Commercial customers in particular are under pressure to upgrade to higher-efficiency or electric systems. Burnham’s Ambient product line, which includes electric boilers and heat pumps, is built to serve that trend while preserving the company’s long-standing distribution and installer relationships.
To support this growth, Burnham began construction in late 2024 on a new 45,000-square-foot facility next to its Centerville plant. The site will focus on high-efficiency condensing boiler production and is expected to come online in early 2026.
Competitive Dynamics
The boiler industry isn’t driven by end consumer choice. Most homeowners don’t research boiler brands or compare features, they call a contractor, who chooses the product, sources it locally, and gets it installed fast.
This structure creates a competitive advantage for companies with long-standing contractor relationships, broad catalogs, and dependable supply chains. Burnham holds roughly one-third of the residential boiler market in the U.S., which is the highest in the category. That position was earned through reliability, service, and installer loyalty, and isn’t likely to be eroded by the marketing spending of a competitor.
It’s a lot like cosmetic dentistry. The average patient doesn’t know which bonding agent or ceramic brand is best, they rely on their dentist’s judgment. The contractor relationship works the same way. If a system fails and needs to be replaced quickly, the installer defaults to what’s familiar, available, and proven to work. That puts newer entrants at a structural disadvantage and rewards manufacturers who stay consistent and easy to work with. It’s the same decision structure I saw with XPEL years ago: a specialized product chosen by a trusted expert rather than the end customer.
There are well-capitalized competitors in the space, A.O. Smith (Lochinvar) and Navien among them, but the market isn’t winner-take-all. Burnham has continued gaining share even in years when overall industry volume has declined. More evidence that this is about trust, not price… and trust is hard to earn.
The move toward electrification may change the product mix over time, but Burnham has already responded with its Ambient line of heat pumps and electric boilers. The company is updating its offerings while staying inside the same distribution and decision-making channels. That keeps the contractor relationship intact, even as technologies evolve.
Financial Performance
Burnham posted record results in 2024, and momentum carried into the first quarter of 2025.
Trailing twelve-month revenue reached $279 million, up 11.8% year-over-year. Gross profit totaled $69 million, with gross margin at 24.4%. Net income came in at $12 million, or $2.55 per share, and EBITDA was $23 million. The company generated $14 million in free cash flow and raised its annual dividend to $0.92 per share (a 3.8% yield at current prices), the first increase in nearly a decade.
Q1 2025 results confirmed continued strength: revenue grew 15.8% to $64.8 million, with gross margin expanding to 25.4%. Residential sales rose 20%, commercial was up 2.6%, and rental and service increased over 40%. EPS for the quarter was $0.72, and net income was $3.4 million.
One piece that deserves more attention is Burnham’s rental and service division, Thermal InMotion. This business provides mobile boiler systems and turnkey service offerings for commercial and industrial clients. It’s hard to break out the financials precisely, but rental businesses like this often carry higher margins, steadier demand, and better pricing power than equipment sales. In Q1, this segment grew over 40% year-over-year, suggesting it’s gaining traction. Over time, it could provide a stable earnings floor, especially during seasonal or construction-driven slowdowns, and may be worth much more.
In May 2025, Burnham sold Thermo Pride and Norwood Manufacturing for $27.6 million in cash. These were non-core, lower-margin operations that contributed modestly to revenue. The sale aligns with management’s focus on operational efficiency, balance sheet strength, and renewed emphasis on boilers and the growing rental division.
Importantly, the divested units had weaker margins than Burnham’s core businesses. Their removal should lift consolidated profitability, an effect not yet visible in the reported numbers but likely to show up later this year. In a low-margin business like this, even modest mix improvements can meaningfully boost net income. A 100-basis-point margin gain could translate to a 20% increase in earnings without any top-line growth. The Rational Formula system has a set of factors designed to look for exactly these kinds of transitions, and I wouldn’t be surprised if Burnham continues to rank near the top as these improvements show up.
Valuation
At a share price of $24, Burnham trades at a market cap of $112 million (though some data providers incorrectly show it around $80 million). As of Q1, the company reported $6 million in cash and $29 million in debt—but those figures don’t yet include the $27.6 million in proceeds from the May 2025 divestiture of Thermo Pride and Norwood Manufacturing. Pro forma enterprise value likely sits closer to $110 million.
Based on the most recent twelve months and including the divestiture:
P/E: 9.4x
EV/EBITDA: 4.7–5.2x
EV/Free Cash Flow: 7.6–8.0x
Dividend Yield: 3.8%
There are no analysts covering the company, and the stock trades OTC. That lack of visibility is part of the opportunity.
A conservative DCF suggests the business could support a valuation north of $200 million, implying a share price closer to $40. Not that you should put too much weight on a DCF.
Risks
Like any small industrial business, Burnham carries execution risk.
If demand softens or margins compress, it may take time for the market to reprice the business.
There’s also competitive risk as the HVAC landscape shifts toward electrification and heat pumps. Burnham is positioning for this transition with new electric and hybrid products, but those segments are still early. Housing market weakness could weigh on demand in the short term, although the replacement cycle helps offset that.
Lastly, while insiders own a meaningful portion of shares, external shareholders have limited influence, and disclosure, though sufficient, is not as robust as what you’d see from a listed company.
Final Thoughts
If you haven’t noticed, I don’t mind finding things after they’ve already been discovered. And that’s partly by design.
The ranking system tends to pick up on price and volume changes that reflect early accumulation or emerging interest. In this case, I can actually see where Salmon Writer’s write-up hits the system, the volume spike and price change dynamics pushed Burnham up the ranks, even with the price increase. That’s part of why the strategy works. While you won’t always be first, you’re often catching stocks that are already moving in the right direction. And while that lowers the potential upside, it frequently shortens the time it takes for price and value to converge.
At the same time, plenty of names hit the top of the system before anyone’s paying attention. Burnham, for example, started ranking well almost two years before the write-up. Which makes you wonder: how many of the current high-ranking names are about to have a sharp analyst write about them and kick off the next move?
If you have time and talent, you can find these setups yourself, but most people don’t. They’re either too busy or too new to trust their own analysis. For them, a strategy that finds high-potential names, and pairs them with curated research, can work really well.
That’s what I’m building here. A system that does the hard filtering for you. A process you can follow without needing to spend your weekends digging through 10-Ks. I’ll post original deep dives for sure, but I’ll also highlight setups that rank well, have been discovered, and still look interesting, even if we’re not the first to find them.
Next:
I’ve discovered a company that hasn’t moved yet but looks promising. I found it by running the ranking system in an area that I don’t check all the time. I’ll try and get that write up out, possibly as soon as next week. Subscribe and you’ll have it in your inbox when it’s ready.
Disclosure: I/we own shares in Burnham Holdings (BURCA) at the time of writing and do not hold a position in XPEL.
Disclaimer: This post is for informational and educational purposes only. It does not constitute investment advice or a recommendation to buy or sell any security. Always do your own research and consult with a qualified financial advisor before making investment decisions.