At the current price of $52, what are market expectations regarding DXP Enterprises’ future operating performance? Over the next 6 years, DXP Enterprises shares will need to reach $88 to achieve average annual stock market performance of 9.0%. To achieve Upper quartile performance, DXP Enterprises’ stock price will need to reach $103 by 2029.
Executive Summary
- DXP Enterprises’ important characteristics: very high profitability, high financial strength, above average expected growth, and stability. A big positive influence on DXP Enterprises’ valuation is its superior Risk Profile.
- High valuation, leading shareholder returns. Current valuation levels are high relative to the DXP Enterprises Peer Group. Recent market returns have significantly outperformed the DXP Enterprises Peer Group. Total shareholder returns expected to equal the overall equity market. Based on current investor expectations, DXP Enterprises shares should reach a level of $87 by 2029 — an 8.8% per year total shareholder return. A 2029 stock price of $88 would reflect median performance and a price of $103 would be required to reach upper quartile performance.
- DXP Enterprises’ historical growth is modestly above average. Historical growth has been high relative to the DXP Enterprises Peer Group and forecasted growth is relatively average. Revenue Growth, and Asset Growth have been superior. These factors have buoyed market perceptions of DXP Enterprises. DXP Enterprises’ historical income statement growth has been higher than growth in the balance sheet. Revenue growth has exceeded asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity.
- Return on Equity, and Pretax Margin are group leading. These factors have strengthened market perceptions of DXP Enterprises. The company has very low cash and will have to work to generate attractive investments and improve valuation.
- Risk Profile has been DXP Enterprises’ biggest valuation strength. DXP Enterprises’ risk profile is favorable. Overall variability has been very high with very high revenue variability, relatively low E.P.S. variability, and only average stock price volatility. Financial Strength is relatively very high and earnings’ expectations are relatively very high. The debt/capital ratio has risen.
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