The action today was positive...DXPE rattled the saber with the shorts who started covering and then at the peak of today's trading, which by the way was the old floor of support and now the first area of resistance, the shorts jumped back on the band wagon with the OIH index gapping up and selling off...they were emboldened to try again...at the technical area of resistance...some day traders took their profits too adding some selling pressure to the day. However, the stock held a respectable gain in spite of the technical barriers DXPE faced today. Bottom line? The positive action was stellar and the stage is set for a strong open tomorrow for the broader markets and for DXPE.
When the shorts see DXPE gap higher in the morning and realize their folly, and all the longs who took a quick profit today see the train leave the station, then we see a strong advance back to the old floor of resistance that we tested today....
and then with some good earnings coming out this week and some solid forecasts encourageing a rising market...we should see DXPE regain ground back to the $30's ahead of earnings....just remember the current fair market value for DXPE is over $50 a share and when they beat earnings and give a strong forecast, we could see a PPS more reflective of their PEG....
so should you be long or short? ...and should you be in or out at days end?
how do you come up with fair value in the 50's i agree with what you said you have to be in this stock below 30 technicaly you would be foolish to trade completley out of it mabey sell some on the way up but this thing could go to 30 in a few days and you have to be in it i'm long 5000 at 23.3 ave
Well, a better question, it seems, is "how do you come up with a fair value?"
The PEG is a generally accepted measure of arriving at a fair value. A P/E divided by the 5 year expected annualized growth rate in earnings gives you the PEG. A PEG of 1.0 is believed to represent a fair value for an equity security. A PEG of 1.00 would be where the P/E is equal to the growth rate.
If you use the 5 year earnings growth rate from the recent Stonegate report on DXP of .30 and take the 2006 projected earnings of $2.00; you get a PEG, given the current price of 25.23 of .4205. That is, the P/E would be 12.615 divided by the growth rate expressed as a whole number, or, 30 gives a PEG of .4205. To achieve a PEG of 1.00, DXP's share price would have to go to exactly $60 per share. If you use 2007 earnings, as some are doing since we are into the 4th quarter of 06 now, DXP earnings are projected at 2.51 (based on the average of Dutton and Stonegate). If you use 07 earnings, the current PEG is .335. A fair value, based on 07 earnings of 2.51 and annualized forward growth of .30, would be $75.30.
Who knows what earnings and growth will actually be, but this is how you arrive at a fair value, according to accepted practice today.
I'm in... and I have been since DXPE has been acting better. I agree with your assessment that this thing is way undervalued. I wouldn't put a price on the stock, but I think there is more upside than downside at this point.