DXP Enterprises (NASDAQ: DXPE) is not your regular, boring industrial company that follows the business cycle. DXP Enterprises has increased its earnings per share (EPS) by 63 percent over the trailing 12 months.
In return, investors have seen the stock price increase by 43 percent during the past year. The good news is there is significantly more growth ahead as DXP Enterprises plans to double sales by 2016.
DXP Enterprises provides innovative pumping solutions, supply chain services and maintenance, repair, operating and production services that emphasize and utilize DXP’s vast product knowledge and technical expertise in rotating equipment, bearings, power transmission, industrial supplies and safety products and services.
The company, with a small cap of $728 million, offers its customers a single source of supply on an efficient and competitive basis by being a first-tier distributor that purchases its products directly from the manufacturer.
DXP Enterprises has grown partly through several acquisitions in the past few years:
- On October 10, 2011, DXP acquired substantially all of the assets of Kenneth Crosby (KC).
- On December 30, 2011, DXP acquired substantially all of the assets of C.W. Rod Tool Company (CW Rod).
- In July 2012, the Company acquired HSE Integrated Ltd.
The results are evident as DXP Enterprises reported an increase of 56 percent in net income and a 39.5 percent increase in sales for the third quarter of 2012, compared to the same quarter a year earlier.
DXP Enterprises announced net income of $13.1 million for the third quarter ended September 30, 2012, with diluted earnings per share (EPS) of $0.86 compared to net income of $8.3 million and diluted EPS of $0.55 for the third quarter of 2011.
Sales increased $82.1 million to approximately$289.9 million from $207.9 million for the same period in 2011. After excluding sales from acquisitions, sales increased 7.4 percent from 2011, on a same store sales basis.
Net income for the nine months ended September 30, 2012 was $36.9 million, with diluted EPS of $2.43, compared to net income of $22.2 million and diluted EPS of $1.47 for the first nine months of 2011.
Sales for the nine months ended September 30, 2012 increased $215.5 million, or 36.6 percent, to approximately $804.1 million from $588.6 million for the same period in 2011. After excluding sales from acquisitions, sales for the first nine months of 2012 increased 13.2 percent from 2011 on a same store sales basis. DXP has a return on invested capital (ROIC) of 28.8 percent.
On a trailing 12-month basis, DXP Enterprises exceeded its sales goal of $1 billion and third-quarter EBITDA margins were 10.6 percent.
DXP Enterprises has new financial goals of $2 billion in sales by 2016 at 10 percent EBITDA margins. To double sales over the next 3 years, the company is projecting a compound average growth rate of 24 percent per year. This will be accomplished through both organic (internal) and inorganic (external) growth including continued acquisitions and expanding geographic markets.
DXP has access to credit and loan capital in the amount of $425 million for expansion and growth opportunities.
DXP Enterprises trades at the industry average price-to-earnings (P/E) ratio of 17. The company is projected to have EPS of $3.81 in 2013 and $4.32 in 2014. First Call Analyst consensus has a BUY recommendation with a rating of 1.8.
DXP Enterprises (NASDAQ: DXPE) has a 12-month price target of 65.
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Greg Pugh, an income-investing expert, publishes a newsletter called Investing for Monthly Income.
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