What a fantastic six months it’s been for DXP. Shares of the company have skyrocketed 64.3%, hitting $127.50. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now still a good time to buy DXPE? Or are investors being too optimistic? Find out in our full research report, it’s free.
Why Does DXPE Stock Spark Debate?
Founded during the emergence of Big Oil in Texas, DXP (NASDAQ: DXPE) provides pumps, valves, and other industrial components.
Two Things to Like:
1. Long-Term Revenue Growth Shows Strong Momentum
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, DXP grew its sales at a solid 10.4% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers.
2. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
DXP’s EPS grew at an astounding 34.3% compounded annual growth rate over the last five years, higher than its 10.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
One Reason to be Careful:
Free Cash Flow Margin Dropping
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, DXP’s margin dropped by 4.2 percentage points over the last five years. If the trend continues, it could signal it’s in the middle of an investment cycle. DXP’s free cash flow margin for the trailing 12 months was 2%.
Final Judgment
DXP has huge potential even though it has some open questions, and after the recent surge, the stock trades at 22.7× forward P/E (or $127.50 per share). Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
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