What a fantastic six months it’s been for DXP. Shares of the company have skyrocketed 53.7%, hitting $166.41. This performance may have investors wondering how to approach the situation.
Following the strength, is DXPE a buy right now? Or is the market overestimating its value? Find out in our full research report, it’s free.
Why Are We Positive on DXPE?
Founded during the emergence of Big Oil in Texas, DXP (NASDAQ: DXPE) provides pumps, valves, and other industrial components.
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, DXP’s 16.8% annualized revenue growth over the last five years was incredible. Its growth beat the average industrials company and shows its offerings resonate with customers.
2. Operating Margin Rising, Profits Up
Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.
DXP’s operating margin rose by 4.1 percentage points over the last five years, as its sales growth gave it operating leverage. Its operating margin for the trailing 12 months was 8.8%.
3. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
DXP’s EPS grew at 61.7% compounded annual growth rate over the last five years, higher than its 16.8% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Final Judgment
These are just a few reasons why we’re bullish on DXP, and after the recent surge, the stock trades at 25.4× forward P/E (or $166.41 per share). Is now the time to buy despite the apparent froth? See for yourself in our comprehensive research report, it’s free.
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