Why DXP Enterprises, Inc. (NASDAQ:DXPE) Could Be Worth Watching
DXP Enterprises, Inc. (NASDAQ:DXPE), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$31.12 at one point, and dropping to the lows of US$24.52. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether DXP Enterprises' current trading price of US$26.28 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at DXP Enterprises’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for DXP Enterprises
What Is DXP Enterprises Worth?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 9.7x is currently trading slightly below its industry peers’ ratio of 12.52x, which means if you buy DXP Enterprises today, you’d be paying a reasonable price for it. And if you believe DXP Enterprises should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that DXP Enterprises’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from DXP Enterprises?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted profit growth of 8.2% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for DXP Enterprises, at least in the short term.
What This Means For You
Are you a shareholder? It seems like the market has already priced in DXPE’s growth outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at DXPE? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on DXPE, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of DXP Enterprises.
If you are no longer interested in DXP Enterprises, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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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