Intrinsic value of DXP Enterprises, Inc. - DXPE

Previous Close

$33.83

  Intrinsic Value

$70.13

stock screener

  Rating & Target

str. buy

+107%

Previous close

$33.83

 
Intrinsic value

$70.13

 
Up/down potential

+107%

 
Rating

str. buy

We calculate the intrinsic value of DXPE stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  17.10
  15.89
  14.80
  13.82
  12.94
  12.14
  11.43
  10.79
  10.21
  9.69
  9.22
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
  6.63
  6.47
  6.32
  6.19
  6.07
  5.97
  5.87
  5.78
  5.70
  5.63
  5.57
Revenue, $m
  1,424
  1,650
  1,894
  2,156
  2,435
  2,731
  3,043
  3,371
  3,716
  4,076
  4,451
  4,843
  5,251
  5,675
  6,115
  6,574
  7,050
  7,544
  8,059
  8,593
  9,149
  9,728
  10,330
  10,958
  11,611
  12,293
  13,003
  13,745
  14,519
  15,328
Variable operating expenses, $m
  1,187
  1,374
  1,577
  1,794
  2,026
  2,271
  2,530
  2,803
  3,088
  3,387
  3,694
  4,019
  4,357
  4,709
  5,075
  5,455
  5,850
  6,260
  6,687
  7,131
  7,592
  8,072
  8,572
  9,093
  9,635
  10,200
  10,790
  11,406
  12,048
  12,719
Fixed operating expenses, $m
  140
  143
  146
  149
  153
  156
  160
  163
  167
  170
  174
  178
  182
  186
  190
  194
  198
  203
  207
  212
  216
  221
  226
  231
  236
  241
  247
  252
  258
  263
Total operating expenses, $m
  1,327
  1,517
  1,723
  1,943
  2,179
  2,427
  2,690
  2,966
  3,255
  3,557
  3,868
  4,197
  4,539
  4,895
  5,265
  5,649
  6,048
  6,463
  6,894
  7,343
  7,808
  8,293
  8,798
  9,324
  9,871
  10,441
  11,037
  11,658
  12,306
  12,982
Operating income, $m
  97
  133
  171
  212
  257
  304
  353
  406
  461
  518
  584
  646
  712
  780
  851
  925
  1,001
  1,081
  1,164
  1,251
  1,341
  1,435
  1,532
  1,634
  1,740
  1,851
  1,967
  2,087
  2,214
  2,346
EBITDA, $m
  120
  158
  200
  244
  292
  343
  396
  453
  512
  574
  639
  707
  777
  851
  927
  1,007
  1,089
  1,175
  1,265
  1,358
  1,455
  1,556
  1,661
  1,771
  1,885
  2,004
  2,129
  2,259
  2,395
  2,537
Interest expense (income), $m
  14
  21
  27
  33
  40
  47
  55
  64
  72
  82
  91
  101
  112
  123
  135
  146
  159
  172
  185
  199
  214
  229
  244
  261
  277
  295
  314
  333
  353
  374
  395
Earnings before tax, $m
  76
  106
  138
  172
  209
  248
  290
  333
  379
  427
  482
  534
  589
  645
  704
  766
  830
  896
  965
  1,037
  1,112
  1,190
  1,272
  1,356
  1,445
  1,537
  1,634
  1,735
  1,840
  1,950
Tax expense, $m
  21
  29
  37
  47
  56
  67
  78
  90
  102
  115
  130
  144
  159
  174
  190
  207
  224
  242
  261
  280
  300
  321
  343
  366
  390
  415
  441
  468
  497
  527
Net income, $m
  56
  77
  101
  126
  153
  181
  211
  243
  277
  312
  352
  390
  430
  471
  514
  559
  606
  654
  705
  757
  812
  869
  928
  990
  1,055
  1,122
  1,193
  1,266
  1,343
  1,424

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  820
  950
  1,091
  1,241
  1,402
  1,572
  1,752
  1,941
  2,139
  2,346
  2,563
  2,788
  3,023
  3,267
  3,521
  3,784
  4,059
  4,343
  4,639
  4,947
  5,267
  5,600
  5,947
  6,308
  6,685
  7,077
  7,486
  7,913
  8,359
  8,824
Adjusted assets (=assets-cash), $m
  820
  950
  1,091
  1,241
  1,402
  1,572
  1,752
  1,941
  2,139
  2,346
  2,563
  2,788
  3,023
  3,267
  3,521
  3,784
  4,059
  4,343
  4,639
  4,947
  5,267
  5,600
  5,947
  6,308
  6,685
  7,077
  7,486
  7,913
  8,359
  8,824
Revenue / Adjusted assets
  1.737
  1.737
  1.736
  1.737
  1.737
  1.737
  1.737
  1.737
  1.737
  1.737
  1.737
  1.737
  1.737
  1.737
  1.737
  1.737
  1.737
  1.737
  1.737
  1.737
  1.737
  1.737
  1.737
  1.737
  1.737
  1.737
  1.737
  1.737
  1.737
  1.737
Average production assets, $m
  215
  249
  286
  326
  368
  412
  460
  509
  561
  615
  672
  731
  793
  857
  923
  993
  1,064
  1,139
  1,217
  1,298
  1,382
  1,469
  1,560
  1,655
  1,753
  1,856
  1,964
  2,075
  2,192
  2,315
Working capital, $m
  241
  279
  320
  364
  412
  462
  514
  570
  628
  689
  752
  818
  887
  959
  1,034
  1,111
  1,191
  1,275
  1,362
  1,452
  1,546
  1,644
  1,746
  1,852
  1,962
  2,077
  2,198
  2,323
  2,454
  2,590
Total debt, $m
  308
  381
  460
  545
  635
  731
  832
  938
  1,049
  1,166
  1,287
  1,414
  1,546
  1,683
  1,826
  1,974
  2,128
  2,288
  2,455
  2,628
  2,808
  2,995
  3,190
  3,393
  3,604
  3,824
  4,054
  4,294
  4,545
  4,807
Total liabilities, $m
  461
  534
  613
  698
  788
  884
  985
  1,091
  1,202
  1,319
  1,440
  1,567
  1,699
  1,836
  1,979
  2,127
  2,281
  2,441
  2,607
  2,780
  2,960
  3,147
  3,342
  3,545
  3,757
  3,977
  4,207
  4,447
  4,698
  4,959
Total equity, $m
  359
  416
  478
  544
  614
  689
  767
  850
  937
  1,028
  1,122
  1,221
  1,324
  1,431
  1,542
  1,658
  1,778
  1,902
  2,032
  2,167
  2,307
  2,453
  2,605
  2,763
  2,928
  3,100
  3,279
  3,466
  3,661
  3,865
Total liabilities and equity, $m
  820
  950
  1,091
  1,242
  1,402
  1,573
  1,752
  1,941
  2,139
  2,347
  2,562
  2,788
  3,023
  3,267
  3,521
  3,785
  4,059
  4,343
  4,639
  4,947
  5,267
  5,600
  5,947
  6,308
  6,685
  7,077
  7,486
  7,913
  8,359
  8,824
Debt-to-equity ratio
  0.860
  0.920
  0.960
  1.000
  1.030
  1.060
  1.080
  1.100
  1.120
  1.130
  1.150
  1.160
  1.170
  1.180
  1.180
  1.190
  1.200
  1.200
  1.210
  1.210
  1.220
  1.220
  1.220
  1.230
  1.230
  1.230
  1.240
  1.240
  1.240
  1.240
Adjusted equity ratio
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438
  0.438

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  56
  77
  101
  126
  153
  181
  211
  243
  277
  312
  352
  390
  430
  471
  514
  559
  606
  654
  705
  757
  812
  869
  928
  990
  1,055
  1,122
  1,193
  1,266
  1,343
  1,424
Depreciation, amort., depletion, $m
  23
  26
  29
  32
  35
  39
  43
  47
  51
  56
  56
  60
  66
  71
  76
  82
  88
  94
  101
  107
  114
  121
  129
  137
  145
  153
  162
  172
  181
  191
Funds from operations, $m
  79
  103
  129
  158
  188
  220
  255
  290
  328
  368
  407
  451
  495
  542
  591
  641
  694
  748
  805
  864
  926
  990
  1,057
  1,127
  1,200
  1,276
  1,355
  1,438
  1,524
  1,615
Change in working capital, $m
  35
  38
  41
  44
  47
  50
  53
  55
  58
  61
  63
  66
  69
  72
  74
  77
  80
  84
  87
  90
  94
  98
  102
  106
  110
  115
  120
  125
  131
  137
Cash from operations, $m
  43
  65
  88
  114
  141
  170
  202
  235
  270
  307
  344
  384
  426
  470
  516
  564
  613
  665
  718
  774
  832
  893
  955
  1,021
  1,089
  1,161
  1,235
  1,312
  1,394
  1,478
Maintenance CAPEX, $m
  -15
  -18
  -21
  -24
  -27
  -30
  -34
  -38
  -42
  -46
  -51
  -56
  -60
  -66
  -71
  -76
  -82
  -88
  -94
  -101
  -107
  -114
  -121
  -129
  -137
  -145
  -153
  -162
  -172
  -181
New CAPEX, $m
  -31
  -34
  -37
  -40
  -42
  -45
  -47
  -50
  -52
  -54
  -57
  -59
  -62
  -64
  -67
  -69
  -72
  -75
  -78
  -81
  -84
  -87
  -91
  -95
  -99
  -103
  -107
  -112
  -117
  -122
Cash from investing activities, $m
  -46
  -52
  -58
  -64
  -69
  -75
  -81
  -88
  -94
  -100
  -108
  -115
  -122
  -130
  -138
  -145
  -154
  -163
  -172
  -182
  -191
  -201
  -212
  -224
  -236
  -248
  -260
  -274
  -289
  -303
Free cash flow, $m
  -3
  13
  31
  50
  72
  95
  121
  147
  176
  206
  236
  270
  304
  341
  379
  418
  459
  502
  547
  593
  641
  691
  743
  797
  854
  913
  974
  1,038
  1,105
  1,175
Issuance/(repayment) of debt, $m
  68
  73
  79
  85
  90
  96
  101
  106
  111
  116
  122
  127
  132
  137
  143
  148
  154
  160
  166
  173
  180
  187
  195
  203
  211
  220
  230
  240
  251
  262
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  68
  73
  79
  85
  90
  96
  101
  106
  111
  116
  122
  127
  132
  137
  143
  148
  154
  160
  166
  173
  180
  187
  195
  203
  211
  220
  230
  240
  251
  262
Total cash flow (excl. dividends), $m
  65
  86
  110
  135
  162
  191
  222
  254
  287
  323
  358
  396
  436
  478
  521
  566
  613
  662
  713
  766
  821
  878
  938
  1,000
  1,065
  1,133
  1,204
  1,278
  1,356
  1,437
Retained Cash Flow (-), $m
  -52
  -57
  -62
  -66
  -70
  -75
  -79
  -83
  -87
  -91
  -95
  -99
  -103
  -107
  -111
  -116
  -120
  -125
  -130
  -135
  -140
  -146
  -152
  -158
  -165
  -172
  -179
  -187
  -195
  -204
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  13
  29
  48
  69
  92
  117
  143
  171
  201
  232
  263
  298
  334
  371
  410
  451
  493
  537
  583
  631
  681
  732
  786
  842
  900
  961
  1,025
  1,091
  1,160
  1,233
Discount rate, %
  6.80
  7.14
  7.50
  7.87
  8.27
  8.68
  9.11
  9.57
  10.05
  10.55
  11.08
  11.63
  12.21
  12.82
  13.46
  14.14
  14.84
  15.59
  16.37
  17.18
  18.04
  18.94
  19.89
  20.89
  21.93
  23.03
  24.18
  25.39
  26.66
  27.99
PV of cash for distribution, $m
  12
  25
  39
  51
  62
  71
  78
  82
  85
  85
  83
  79
  75
  69
  62
  54
  47
  40
  33
  26
  21
  16
  12
  9
  6
  4
  3
  2
  1
  1
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

DXP Enterprises, Inc. (DXP) is engaged in the business of distributing maintenance, repair and operating (MRO) products, equipment and service to industrial customers. The Company operates through three segments: Service Centers, Supply Chain Services and Innovative Pumping Solutions. The Service Centers segment provides MRO products, equipment and services, including technical expertise and logistics capabilities to industrial customers. The Supply Chain Services segment manages all or part of a customer's supply chain, including procurement and inventory management. The Innovative Pumping Solutions segment provides source for engineering, systems design and fabrication. It operates from approximately 190 locations in over 40 states in the United States, approximately 10 provinces in Canada, Dubai and one state in Mexico. The Company's product categories include rotating equipment, bearings & power transmission, industrial supplies, metal working and safety products & services.

FINANCIAL RATIOS  of  DXP Enterprises, Inc. (DXPE)

Valuation Ratios
P/E Ratio 72.7
Price to Sales 0.6
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 12.1
Price to Free Cash Flow 13.5
Growth Rates
Sales Growth Rate -22.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -64.3%
Cap. Spend. - 3 Yr. Gr. Rate -9%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 69%
Total Debt to Equity 89.3%
Interest Coverage 2
Management Effectiveness
Return On Assets 2.8%
Ret/ On Assets - 3 Yr. Avg. -1.4%
Return On Total Capital 1.6%
Ret/ On T. Cap. - 3 Yr. Avg. -4.3%
Return On Equity 3.6%
Return On Equity - 3 Yr. Avg. -10.3%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 27.5%
Gross Margin - 3 Yr. Avg. 28.2%
EBITDA Margin 5.6%
EBITDA Margin - 3 Yr. Avg. 2.5%
Operating Margin 2%
Oper. Margin - 3 Yr. Avg. -0.4%
Pre-Tax Margin 1%
Pre-Tax Margin - 3 Yr. Avg. -1.3%
Net Profit Margin 0.8%
Net Profit Margin - 3 Yr. Avg. -1.8%
Effective Tax Rate 30%
Eff/ Tax Rate - 3 Yr. Avg. -14.4%
Payout Ratio 0%

DXPE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DXPE stock intrinsic value calculation we used $1216 million for the last fiscal year's total revenue generated by DXP Enterprises, Inc.. The default revenue input number comes from 0001 income statement of DXP Enterprises, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our DXPE stock valuation model: a) initial revenue growth rate of 17.1% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6.8%, whose default value for DXPE is calculated based on our internal credit rating of DXP Enterprises, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of DXP Enterprises, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of DXPE stock the variable cost ratio is equal to 83.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $137 million in the base year in the intrinsic value calculation for DXPE stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 8.7% for DXP Enterprises, Inc..

Corporate tax rate of 27% is the nominal tax rate for DXP Enterprises, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the DXPE stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for DXPE are equal to 15.1%.

Life of production assets of 12.1 years is the average useful life of capital assets used in DXP Enterprises, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for DXPE is equal to 16.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $306.848 million for DXP Enterprises, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 17.582 million for DXP Enterprises, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of DXP Enterprises, Inc. at the current share price and the inputted number of shares is $0.6 billion.

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