Over the last six months, IDEX shares have sunk to $184.65, producing a disappointing 19.5% loss - worse than the S&P 500’s 5.8% drop. This might have investors contemplating their next move.
Is now the time to buy IDEX, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Do We Think IDEX Will Underperform?
Even though the stock has become cheaper, we're swiping left on IDEX for now. Here are three reasons why you should be careful with IEX and a stock we'd rather own.
1. Core Business Falling Behind as Demand Declines
Investors interested in Gas and Liquid Handling companies should track organic revenue in addition to reported revenue. This metric gives visibility into IDEX’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, IDEX’s organic revenue averaged 2.1% year-on-year declines. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests IDEX might have to lean into acquisitions to grow, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus). 
2. 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, IDEX’s margin dropped by 5.4 percentage points over the last five years. If its declines continue, it could signal increasing investment needs and capital intensity. IDEX’s free cash flow margin for the trailing 12 months was 17%.
3. New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, IDEX’s ROIC has decreased over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
We cheer for all companies making their customers lives easier, but in the case of IDEX, we’ll be cheering from the sidelines. Following the recent decline, the stock trades at 22.1× forward P/E (or $184.65 per share). At this valuation, there’s a lot of good news priced in - we think there are better opportunities elsewhere. We’d recommend looking at one of our top software and edge computing picks.
Stocks We Would Buy Instead of IDEX
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today.
