DXP currently trades at $148.68 and has been a dream stock for shareholders. It’s returned 439% since February 2021, blowing past the S&P 500’s 73.7% gain. The company has also beaten the index over the past six months as its stock price is up 22.4%.

Is now still a good time to buy DXPE? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.

Why Are We Positive On DXP?

Founded during the emergence of Big Oil in Texas, DXP (NASDAQ: DXPE) provides pumps, valves, and other industrial components.

1. Skyrocketing Revenue Shows Strong Momentum

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, DXP’s 13% annualized revenue growth over the last five years was excellent. Its growth beat the average industrials company and shows its offerings resonate with customers.

2. Operating Margin Rising, Profits Up

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

DXP’s operating margin rose by 5.1 percentage points over the last five years, as its sales growth gave it immense operating leverage. Its operating margin for the trailing 12 months was 8.7%.

3. Outstanding Long-Term EPS Growth

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

DXP’s EPS grew at an astounding 50.1% compounded annual growth rate over the last five years, higher than its 13% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Final Judgment

These are just a few reasons why we think DXP is a high-quality business, and with its shares outperforming the market lately, the stock trades at 23× forward P/E (or $148.68 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

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