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"We rate DXP ENTERPRISES INC (DXPE) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 6.4%. Since the same quarter one year prior, revenues rose by 17.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- DXP ENTERPRISES INC has improved earnings per share by 6.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, DXP ENTERPRISES INC increased its bottom line by earning $3.94 versus $3.35 in the prior year. This year, the market expects an improvement in earnings ($3.96 versus $3.94).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Trading Companies & Distributors industry average. The net income increased by 7.9% when compared to the same quarter one year prior, going from $16.35 million to $17.64 million.
- The debt-to-equity ratio of 1.33 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, DXPE's quick ratio is somewhat strong at 1.33, demonstrating the ability to handle short-term liquidity needs.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Trading Companies & Distributors industry and the overall market on the basis of return on equity, DXP ENTERPRISES INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- You can view the full analysis from the report here: DXPE Ratings Report