XPEL (XPEL): Earnings Growth Forecast Reinforces Positive Sentiment as Stock Trades Below Fair Value

XPEL (XPEL) posted revenue growth forecasts of 14% per year, comfortably beating the broader US auto components sector's 10.5% growth outlook. Earnings are predicted to accelerate even faster, with EPS expected to expand 30.7% per year, well ahead of the market's 16% annual average. Meanwhile, the current net profit margin edged down to 10.8% from last year's 11.6%. The combination of robust forecasted growth, a share price trading below estimated fair value at $35.31 per share, and high-quality earnings has set an upbeat tone for investors.

See our full analysis for XPEL.

Next, we will see how these results compare to the most widely followed narratives and what that means for where XPEL goes from here.

See what the community is saying about XPEL

Profit Margin Projected to Rise to 15.6%

• Analysts estimate net profit margins will climb from 10.8% today to 15.6% within three years. This nearly five percentage point increase is not yet reflected in current bottom-line figures.
• According to the consensus view, margin expansion will be driven by XPEL's push into higher-margin products and tailored offerings; however, there are tensions:
  • Although the margin forecast is ambitious, this year's margin slipped from 11.6% to 10.8%, highlighting near-term obstacles to rapid improvement.
  • Continued investment in product innovation and distribution channels is considered essential for capturing the forecasted margin gains amid global competition.

DCF Valuation Signals Undervalued Upside

• The current share price of $35.31 is well below the DCF fair value of $58.92 and the consensus analyst target of $47.67. This suggests a potential upside of 67% and 35% respectively if those targets are met.
• The consensus view points to a disconnect in valuation, noting that strong projected earnings growth and an above-peer-quality profile are seen as justification for a higher multiple:
  • The forward-looking PE ratio implied by future profits (16.1x) would be below both the sector average (17.7x) and direct competitors' current average (20.8x), which raises questions about why the market is assigning a discount today.
  • The consensus narrative highlights a wide range in analyst targets ($43 to $55) and urges investors to compare these projections directly against actual business performance and durable growth drivers.

Growth Rate Cooling Versus Historic Trend

• Recent annual earnings growth of 2.8% lags significantly behind the company’s five-year average of 17.3% per year. This breaks from the established track record and suggests growth momentum may be decelerating.
• The consensus view emphasizes that, while headline guidance is brisk, the slower near-term profit increase underscores the need for XPEL’s expansion into international markets and new product platforms to result in faster realized earnings:
  • The company’s rapid global push is intended to diversify revenue streams and reduce concentration risk, with earnings set to potentially double by 2028.
  • The consensus narrative cautions that intensifying competition and evolving OEM partnerships could inhibit XPEL's ability to maintain its historic pace and widen margins as planned.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for XPEL on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

Wondering if you’d interpret the numbers another way? Add your take in just a few minutes and shape your own perspective. Do it your way

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding XPEL.

See What Else Is Out There

XPEL’s recent slowdown in earnings growth and shortfall versus its historic pace could signal less dependable results ahead for investors.

If consistent upward momentum is important to you, check out stable growth stocks screener (2074 results) for companies with proven track records of steady gains through changing market conditions.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com