Does DXP Enterprises (NASDAQ:DXPE) Deserve A Spot On Your Watchlist?
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like DXP Enterprises (NASDAQ:DXPE). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
Check out our latest analysis for DXP Enterprises
How Fast Is DXP Enterprises Growing?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years DXP Enterprises grew its EPS by 6.9% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The music to the ears of DXP Enterprises shareholders is that EBIT margins have grown from 3.6% to 6.6% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check DXP Enterprises' balance sheet strength, before getting too excited.
Are DXP Enterprises Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Shareholders will be pleased by the fact that insiders own DXP Enterprises shares worth a considerable sum. Given insiders own a significant chunk of shares, currently valued at US$84m, they have plenty of motivation to push the business to succeed. Amounting to 17% of the outstanding shares, indicating that insiders are also significantly impacted by the decisions they make on the behalf of the business.
Does DXP Enterprises Deserve A Spot On Your Watchlist?
One important encouraging feature of DXP Enterprises is that it is growing profits. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. These two factors are a huge highlight for the company which should be a strong contender your watchlists. You should always think about risks though. Case in point, we've spotted 2 warning signs for DXP Enterprises you should be aware of.
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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