Is DXP Enterprises, Inc. (NASDAQ:DXPE) Potentially Undervalued?

DXP Enterprises, Inc. (NASDAQ:DXPE), is not the largest company out there, but it saw a significant share price rise of 45% in the past couple of months on the NASDAQGS. The company is now trading at yearly-high levels following the recent surge in its share price. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today we will analyse the most recent data on DXP Enterprises’s outlook and valuation to see if the opportunity still exists.

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What Is DXP Enterprises Worth?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 2.82% above our intrinsic value, which means if you buy DXP Enterprises today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $123.49, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because DXP Enterprises’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Check out our latest analysis for DXP Enterprises

Can we expect growth from DXP Enterprises?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 27% over the next couple of years, the future seems bright for DXP Enterprises. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has already priced in DXPE’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on DXPE, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into DXP Enterprises, you'd also look into what risks it is currently facing. For instance, we've identified 2 warning signs for DXP Enterprises (1 is potentially serious) you should be familiar with.

If you are no longer interested in DXP Enterprises, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.