Shares of DXP Enterprises, Inc. DXPE have been showing impressive gains of late, trading close to its 52-week high of $103.61. The stock closed at $102.67 on Friday, 0.9% below the highest point. Shares of the maintenance, repair and operating (MRO) products distributor have surged 97.2% in the past six months, outpacing the Zacks sub-industry’s and the S&P 500’s growth of 3.4% and 8.2%, respectively.

The company has also outperformed other industry players like Ingersoll Rand Inc. IR and Xylem Inc. XYL, which have lost 8.1% and 14.2%, respectively, over the said time frame.

DXPE Outperforms Industry, S&P 500 & Peers

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The stock is trading above both its 50-day and 200-day moving averages, indicating solid upward momentum and price stability. This reflects a positive market sentiment and confidence in the company's financial health and long-term prospects.

DXPE Shares Trading Above 50-Day and 200-Day SMA

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Factors Favoring the Company

The strongest driver of DXP Enterprises’ business at the moment is strength in its Service Centers segment, which grew approximately 8% year over year in third-quarter 2024. The segment has been benefiting from healthy demand for MRO products, equipment and integrated services, along with positive business mix and contributions from acquired assets. From a product perspective, strength in DXPE’s U.S. safety services and metalworking product divisions and Canadian rotating equipment unit holds promise for its long-term growth.

Solid momentum in the Innovative Pumping Solutions segment remains another growth catalyst for the company. Increased project-related work in the energy, water and wastewater treatment markets has been proving beneficial for the segment. Its performance has also been strengthened by an increase in prices from its vendors and suppliers along with the contributions from acquisitions. Driven by strength across end markets, the segment’s revenues increased 52% in the third quarter of 2024.

DXP Enterprises has booked a few large projects in both energy and water end markets, from which it expects to recognize revenues starting from the first quarter of 2025. That said, the company’s focus on executing its current backlog and planning for modest volume growth across energy, biofuels, food and beverage and water and wastewater markets should drive its long-term growth.

Management also remains focused on acquiring businesses to gain access to new customers, regions and product lines. For instance, in November 2024, DXPE completed the acquisitions of Burt Gurney & Associates (“BGA”) and MaxVac Inc. The inclusion of BGA expanded the reach of DXPE’s Water division into new geographic territory while MaxVac enhanced its vacuum pump capabilities. Acquisitions had a contribution of 6% to the company’s sales in the third quarter.

Also, the company’s focus on operational executions, supply-chain optimization and marketing activities is likely to boost its performance.

Earnings Estimate Revision

The Zacks Consensus Estimate for DXP Enterprises’ 2025 earnings has increased 11.7% to $4.31 per share over the past 60 days, indicating year-over-year growth of 5.9%. 

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Stock Valuation

Despite the positives, DXPE’s lofty valuation remains a concern. The stock is trading at a forward 12-month price-to-earnings (P/E) ratio of 23.82X, higher than the industry average of 21.49X. Also, it is overvalued compared with its peer, Flowserve Corporation FLS, which is trading at 19.62X. This elevated valuation could make the stock vulnerable to further pullbacks if market sentiment sours.

Price-to-Earnings (Forward 12 Months)

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Our Final Take

Robust momentum across safety services, metalworking products and rotating equipment businesses, along with strength in energy and wastewater treatment markets, positions DXP Enterprises favorably for impressive growth in the quarters ahead. Given the strength across most of its served markets, DXPE has built a healthy backlog level that should support its top-line performance.

Despite its expensive valuation, positive analyst sentiment and robust growth prospects indicate it is the right time for potential investors to bet on this Zacks Rank #1 (Strong Buy) company. You can see the complete list of today’s Zacks #1 Rank stocks here.

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