DXP Enterprises: High Earnings Growth At A Discount

| About: DXP Enterprises, (DXPE)

Industrial equipment wholesaler DXP Enterprises (NASDAQ:DXPE) has been on a tear for much of the last year, but with a takeover plan for HSE Integrated on the table, DXPE has taken a fall this month. The company now appears undervalued by many measures, and its earnings and sales trends still remain impressive.

DXP is a professional distribution management company that serves various industries through its Innovative Pumping Solutions (IPS), Supply Chain Services, and MROP Products and Services in the US, according to the company's website. On May 1, DXP Enterprises and HSE Integrated announced intent to combine businesses, with DXP absorbing HSE Integrated, a Canadian industrial safety services company. DXPE stock has now fallen over 12% this last quarter. Market cap stands at $627.31M, and most recent closing price is at $44.27.

Several price multiples now indicate that the stock is undervalued. PEG is at 0.62. P/FCF is at 13.75. TTM P/S at 0.63 vs. 1.37 for the industry average. However, TTM P/E at 16.05 vs. 14.09 for the industry average.

Bear in mind, this is a high-growth company, and with it should come a handsome premium for earnings growth. EPS growth this year was at 57% and over the last 5 years was at 15%. EPS growth next year is expected at 13% and over the next 5 years is expected at 26%, according to Fidelity.

The company's sales trends are also healthy, especially considering inventory. Revenue grew by 37.8% during the most recent quarter ($252.29M vs. $183.09M y/y). Inventory grew by 20.55% during the same time period ($95.33M vs. $79.08M y/y). Inventory, as a percentage of current assets, decreased from 39.45% to 37.42% during the most recent quarter (comparing 3 months ending 2012-03-31 to 3 months ending 2011-03-31).

Profit trends are also encouraging, with a clean bill of health from DuPont analysis. MRQ net profit margin rose to 4.62% vs. 3.46% y/y. MRQ sales/assets rose to 0.597 vs. 0.548 y/y. MRQ assets/equity fell to 2.506 vs. 2.555 y/y.

Despite these promising numbers, there may be more downward price movement as the HSE takeover is completed. However, I see this as an opportunity to pick up high earnings growth at a discounted price.

For a closer look at DXP Enterprises, use Kapitall tools to dig deeper!

For an interactive version of this chart, click on the image below. Market cap data sourced from Zacks Investment Research.

Tool provided by Kapitall (kapitall.com).

*Written by Alexander Crawford. Price multiple data sourced from Fidelity, EPS data sourced from Yahoo! Finance, accounting data sourced from Google Finance.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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