DXPE ==> The Pistachio Winner

[mrmarket]

($$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.)

The original members of WWE's D-Generation X (DX) in 1997 were Shawn Michaels, Triple H (then known as Hunter Hearst Helmsley), Chyna, and Rick Rude. While Shawn Michaels and Triple H were the original duo, Chyna was Triple H's bodyguard who quickly joined, and Rick Rude was added as Michaels' "insurance policy" shortly after the group's formation. They officially referred to themselves as D-Generation X and debuted their signature "Suck It!" slogan on October 13, 1997.

Fast forward to 2025.

Let’s talk about DXP Enterprises (DXPE) — a company so boring it makes beige wallpaper look risky. Industrial distribution? Yawn. Pumps, bearings, MRO services? Zzzzz. But here’s the thing:
Boring is beautiful — especially when it’s quietly compounding under the radar while the market throws confetti at unprofitable AI vaporware with P/S ratios higher than the Fed funds rate.
Today I bought stock in DXPE at 122.17. I will sell it in 4 – 6 weeks at 141.11. Here’s why I like DXPE. This stock is up 135% in the last 12 months and yet its PE is only 24. There’s nothing boring about doubling your money in less than a year.

DXPE sells maintenance, repair, and operations supplies to industrial customers. That includes pumps, valves, bearings — the unsexy, greasy backbone of civilization. They also build engineered pump systems and offer supply chain services. In other words, if it moves, leaks, breaks, or squeaks in a factory, DXP is probably selling something to fix it.
They’re like a hybrid of Grainger + Flowserve + your local mechanic — if your mechanic happened to operate at 15% gross margins and pulled in over $1.6B in revenue last year.

The rest of the world probably thinks this is a commodity distributor that grows 3% a year and dies slowly. Wrong wrong wrong. Here’s what’s actually happening:
Double-digit revenue growth (YoY), thanks to a combo of bolt-on acquisitions and rising demand in energy + water sectors. Operating leverage kicking in. Incremental margins improving because fixed costs are amortized over the growing revenue.

DXPE is trading around ~13x forward earnings. Meanwhile, industrial peers with worse balance sheets and lower returns on capital are cruising at 17–19x. DXPE has a lot of catching up to do and its business performance will take it to a new and higher multiple. That’s because DXPE is a real company with real profits and real cash flow. They don't need to sell shares to keep the lights on.
This company is on the prowl for acquisitions but DXPE isn’t buying flashy unicorns. They’re buying mom-and-pop industrial businesses with sticky customer bases and tacking them on for accretive growth. It’s a classic safe roll up strategy.

So how does this convert to earnings?

Second Quarter 2025 Financial Highlights:

Sales increased 11.9 percent to $498.7 million compared to $445.6 million for the second quarter of 2024 and increased 4.6 percent sequentially from $476.6 million for the first quarter of 2025.

Net income increased 41.3 percent for the second quarter to $23.6 million, compared to $16.7 million for the second quarter of 2024 and $20.6 million for the first quarter of 2025.

Earnings per diluted share for the second quarter was $1.43 based upon 16.5 million diluted shares, compared to $1.00 earnings per diluted share in the second quarter of 2024, based on 16.7 million diluted shares.

At ~$122.17/share, $$$MR. MARKET$$$ is paying:
~13x forward earnings
~0.9x sales
~9.5x EBITDA

Boring distributor? Yes.
Under the radar? Definitely.
Undervalued? Absolutely.
Quiet compounder with acquisition upside? You bet.

Here’s what their boss had to say:

David R. Little, Chairman and Chief Executive Officer commented, "Second quarter results reflect the execution of our growth strategy and the resilience and durability of DXP’s business. We are pleased with our sequential and year-over-year sales growth and strength in our gross profit margins. Overall, we are very pleased with our performance and the progress DXP continues to make as a growth company, and we are excited to enter the second half of 2025.”

DXPE doesn’t need to grow 20% a year to make me money. It just needs to keep being boring and cheap. While Wall Street falls over itself buying into zero-revenue LLM startups, bitcoin, gold and space tourism companies with negative gross margins, I’ll be over here collecting boring industrial cash flows.

DXPE isn’t sexy. But sexiness is overrated. I want cash. I am HUGE!

$$$MR. MARKET$$$

www.mrmarketishuge.com

[jiesen]

Great writeup, and an Excellent pick, $$MM!! I'm in with you at 123!

[GollyMolly]

Good luck, L. P.

[BlueWolf]

I went big on DXPE this morning. I believe the company is strong despite recent earnings miss (sales were up), and the technical pattern suggested a buy when it broke out of its base to the upside. I don’t usually make bets this big, so I hope I’m right. If it continues to rise, I’ll take quick profits on 1/2 at first target then trail the rest with an incrementally tightening stop. I’m trying some new trading techniques to see if I can better optimize gains. I just hate it when a stock has big gains and then retraces hard while I sit through it. Then again, on many occasions I’ve sold into gains when the chart gave a sell signal only to watch the stock go higher. The volatility just makes everything tough, so I have to refine my strategies.

[jiesen]

nice entry on DXPE, BW! I think you can get a 25% or better gain on this one, if you just hang onto it for a bit. It really should be trading above 120 right now.

[antioch6]

Good luck on the trade.

I'm going through some cash analysis on DXPE to invest in it myself, and I was a little worried about the amount of money they're making vs the price of the stock. That was, until I read MrMarket's analysis describing an acquisition strategy. After digging into the details, I found DXPE was acquiring obvious candidates in its line of business. Like the huge one said, it's boring and predictable. This explains all the capital expenditures it's been making the past 2 years. With this new information, DXPE has low capital expenditures which should be the normal in its line of business. At the current price today, I calculated a cash yield of about 8.75%, which isn't extremely high, but it's acceptable. Warren Buffett says he looks for 8-10% and higher. This would be the type of business I want to buy during a downturn.

My only problem with buying DXPE is not knowing enough about the business. The numbers look good but I just don't feel comfortable with the company enough to say I own it and it's a business I like. Maybe in a few months or a few years. Also, the chart of the stock has been all over since 2009. Wild swings up from 20 to 110, then back to 20, now back to 130 and heading on its way back to 90. It just looks that the stock could keep going lower. Maybe it's a buy on the selling. I'm considering it a buy.

[BlueWolf]

Good luck on the trade.

I'm going through some cash analysis on DXPE to invest in it myself, and I was a little worried about the amount of money they're making vs the price of the stock. That was, until I read MrMarket's analysis describing an acquisition strategy. After digging into the details, I found DXPE was acquiring obvious candidates in its line of business. Like the huge one said, it's boring and predictable. This explains all the capital expenditures it's been making the past 2 years. With this new information, DXPE has low capital expenditures which should be the normal in its line of business. At the current price today, I calculated a cash yield of about 8.75%, which isn't extremely high, but it's acceptable. Warren Buffett says he looks for 8-10% and higher. This would be the type of business I want to buy during a downturn.

My only problem with buying DXPE is not knowing enough about the business. The numbers look good but I just don't feel comfortable with the company enough to say I own it and it's a business I like. Maybe in a few months or a few years. Also, the chart of the stock has been all over since 2009. Wild swings up from 20 to 110, then back to 20, now back to 130 and heading on its way back to 90. It just looks that the stock could keep going lower. Maybe it's a buy on the selling. I'm considering it a buy.

I’m not looking at it as a long term buy and hold. It’s primarily a technical play for me. As Mr. Market’s pointed out, however, the revenue growth has been solid. Also, the balance sheet is steady, and the free cash flow was good last quarter. The earnings dip last quarter was a little concerning, but not enough to justify a 25% drop in share price, IMHO. The market always overacts, and the dip in share price brought multiples to very reasonable levels. So I entered at 90 with my first target being resistance at 100, where it also would fill the second gap down. I’ll sell 1/2 there and then trail the rest hoping for another 10% (if it hits the bottom of the first gap) to 40% (if it hits Mr. Market’s target) gain, basically on house money. For me, the risk/reward with an initial stop below 84 (11/6.6 risk/reward at first target) was too good to not take a shot. I’m looking at a similar play on ACM, which I entered today, although I just made a standard bet on this one because the first target, hence the risk/reward, was a little more difficult to determine.

[jiesen]

IMO DXPE is very much linked to the AI bubble. As AI goes, so does DXPE, because lots of its projects are tied to the AI infrastructure buildout. If that stops suddenly, or crashes, then DXPE will suffer along with all the other businesses dependent on supplying the buildout of the next trillion-dollar project. But as long as AI projects continue to march forward, then DXPE will rake in massive profits, and will hit the HUGE target, and then some. I think the AI boom has at least another year or two before it goes bust, so DXPE should be long sold by then... but you never know! That's why it's good to have a basket of 10-12 other investments to spread out that risk.