Here's Why We Think DXP Enterprises (NASDAQ:DXPE) Might Deserve Your Attention Today

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like DXP Enterprises (NASDAQ:DXPE), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for DXP Enterprises

DXP Enterprises' Improving Profits

DXP Enterprises has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. It's good to see that DXP Enterprises' EPS has grown from US$3.44 to US$4.14 over twelve months. This amounts to a 21% gain; a figure that shareholders will be pleased to see.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. DXP Enterprises maintained stable EBIT margins over the last year, all while growing revenue 3.6% to US$1.7b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are DXP Enterprises Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Shareholders will be pleased by the fact that insiders own DXP Enterprises shares worth a considerable sum. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$210m. Coming in at 19% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.

Does DXP Enterprises Deserve A Spot On Your Watchlist?

As previously touched on, DXP Enterprises is a growing business, which is encouraging. To add an extra spark to the fire, significant insider ownership in the company is another highlight. These two factors are a huge highlight for the company which should be a strong contender your watchlists. We don't want to rain on the parade too much, but we did also find 1 warning sign for DXP Enterprises that you need to be mindful of.

Although DXP Enterprises certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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.