Yahoo Finance At US$50.15, Is It Time To Put DXP Enterprises, Inc. (NASDAQ:DXPE) On Your Watch List?
DXP Enterprises, Inc. (NASDAQ:DXPE), is not the largest company out there, but it led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. While good news for shareholders, the company has traded much higher in the past year. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine DXP Enterprises’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
View our latest analysis for DXP Enterprises
Is DXP Enterprises Still Cheap?
Great news for investors – DXP Enterprises is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’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 11.81x is currently well-below the industry average of 17.54x, meaning that it is trading at a cheaper price relative to its peers. Although, there may be another chance to buy again in the future. This is because DXP Enterprises’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will DXP Enterprises generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -1.1% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for DXP Enterprises. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although DXPE is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to DXPE, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on DXPE for a while, but hesitant on making the leap, we recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
If you'd like to know more about DXP Enterprises as a business, it's important to be aware of any risks it's facing. Be aware that DXP Enterprises is showing 3 warning signs in our investment analysis and 2 of those are a bit unpleasant...
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
