• If you are wondering whether DXP Enterprises' current share price lines up with its underlying value, you are not alone. This article walks through what the numbers actually say.
• With the stock at US$132.09 and recent returns of 9.4% over 7 days, 14.4% over 30 days, 22.6% year to date and 23.4% over 1 year, many investors are reassessing both the growth potential and the level of risk they are comfortable with.
• DXP Enterprises has also been in the news for its role as a distributor and service provider across industrial end markets. This has helped keep attention on the stock as conditions shift for capital goods companies. Ongoing coverage of sector demand trends and company specific updates provides important context when you think about whether the recent share price performance is sustainable.
• On our valuation checks, DXP Enterprises scores 3 out of 6 for potential undervaluation, and you can see the breakdown of that score here. Next we will compare different valuation approaches for the stock, then finish with a way of looking at value that goes beyond the usual ratios.

Approach 1: DXP Enterprises Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model takes projected future cash flows and then discounts them back to today using a required rate of return to estimate what the business might be worth right now.

For DXP Enterprises, the model uses a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about $61.0 million. Analyst and extrapolated projections suggest free cash flow reaching around $206.8 million in 2035, with specific estimates such as $106.6 million in 2026 and $159.6 million in 2029, all in dollar terms. Simply Wall St extrapolates beyond the analyst horizon to complete the 10 year path.

When all those future cash flows are discounted back and summed, the model arrives at an intrinsic value of about $171.38 per share. Compared with the recent share price of around $132.09, this implies a 22.9% discount, which indicates that the shares are trading below this DCF estimate.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests DXP Enterprises is undervalued by 22.9%. Track this in your watchlist or portfolio, or discover 878 more undervalued stocks based on cash flows.

Approach 2: DXP Enterprises Price vs Earnings

For a profitable company, the P/E ratio is a useful way to think about what you are paying for each dollar of earnings. Higher growth expectations and lower perceived risk usually support a higher P/E, while slower growth or higher risk tend to justify a lower one.

DXP Enterprises is currently trading on a P/E of 23.8x. That sits close to the Trade Distributors industry average of about 23.9x and above the peer group average of 19.5x, so the stock is neither extremely cheap nor extremely expensive on simple comparisons.

Simply Wall St also calculates a proprietary “Fair Ratio” for DXP Enterprises of 26.0x. This is an estimate of what the P/E might be if the market fully reflected factors like the company’s earnings growth profile, profit margins, industry, market cap and key risks. Because it incorporates these company specific drivers, the Fair Ratio can offer a more tailored yardstick than broad industry or peer averages.

Comparing the current P/E of 23.8x with the Fair Ratio of 26.0x suggests the shares are trading below this customised benchmark.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1427 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your DXP Enterprises Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of DXP Enterprises to the numbers you see on screen.

A Narrative is your story about the company, expressed through assumptions for fair value, future revenue, earnings and margins, so it turns loose ideas into a structured view.

On Simply Wall St, Narratives link that story to a financial forecast and then to a fair value, and you can access them directly on the Community page where millions of investors share their perspectives.

Once you have a Narrative, you can compare its Fair Value to the current price to help decide whether DXP Enterprises looks attractive or stretched based on your own assumptions, and the Narrative keeps updating when new earnings, news or other data are added.

For example, one DXP Enterprises Narrative on the Community page might reflect a very optimistic fair value with higher revenue growth and profit margins, while another could use more conservative assumptions, leading to a lower fair value.

Do you think there's more to the story for DXP Enterprises? Head over to our Community to see what others are saying!

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.