DXP currently trades at $140.21 and has been a dream stock for shareholders. It’s returned 308% since March 2021, blowing past the S&P 500’s 72.4% gain. The company has also beaten the index over the past six months as its stock price is up 18.4% thanks to its solid quarterly results.
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 Is DXPE a Good Business?
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 can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, DXP’s 14.9% annualized revenue growth over the last five years was exceptional. Its growth beat the average industrials company and shows its offerings resonate with customers.
2. Operating Margin Rising, Profits Up
Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
DXP’s operating margin rose by 5.2 percentage points over the last five years, as its sales growth gave it immense 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 47.4% compounded annual growth rate over the last five years, higher than its 14.9% 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 with its shares outperforming the market lately, the stock trades at 22.5× forward P/E (or $140.21 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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