Intrinsic value of DXP Enterprises - DXPE

Previous Close

$33.76

  Intrinsic Value

$0.91

stock screener

  Rating & Target

str. sell

-97%

Previous close

$33.76

 
Intrinsic value

$0.91

 
Up/down potential

-97%

 
Rating

str. sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -22.85
  9.60
  9.14
  8.73
  8.35
  8.02
  7.72
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
Revenue, $m
  962
  1,054
  1,151
  1,251
  1,356
  1,464
  1,577
  1,695
  1,817
  1,944
  2,075
  2,212
  2,355
  2,503
  2,658
  2,819
  2,986
  3,161
  3,343
  3,534
  3,732
  3,940
  4,157
  4,383
  4,620
  4,868
  5,128
  5,399
  5,684
  5,982
  6,294
Variable operating expenses, $m
 
  1,077
  1,173
  1,274
  1,379
  1,488
  1,602
  1,719
  1,842
  1,969
  2,101
  2,220
  2,363
  2,512
  2,667
  2,828
  2,997
  3,172
  3,355
  3,546
  3,745
  3,953
  4,171
  4,398
  4,636
  4,885
  5,145
  5,418
  5,703
  6,002
  6,315
Fixed operating expenses, $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 operating expenses, $m
  943
  1,077
  1,173
  1,274
  1,379
  1,488
  1,602
  1,719
  1,842
  1,969
  2,101
  2,220
  2,363
  2,512
  2,667
  2,828
  2,997
  3,172
  3,355
  3,546
  3,745
  3,953
  4,171
  4,398
  4,636
  4,885
  5,145
  5,418
  5,703
  6,002
  6,315
Operating income, $m
  19
  -22
  -23
  -23
  -23
  -24
  -24
  -25
  -25
  -26
  -26
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
EBITDA, $m
  49
  12
  13
  14
  15
  16
  18
  19
  20
  22
  23
  25
  26
  28
  30
  31
  33
  35
  37
  39
  42
  44
  46
  49
  51
  54
  57
  60
  63
  67
  70
Interest expense (income), $m
  14
  11
  13
  14
  16
  18
  20
  22
  24
  26
  28
  31
  33
  36
  38
  41
  44
  47
  50
  53
  57
  60
  64
  68
  72
  76
  80
  85
  90
  95
  100
Earnings before tax, $m
  10
  -33
  -35
  -37
  -40
  -42
  -44
  -46
  -49
  -52
  -54
  -38
  -41
  -44
  -47
  -51
  -54
  -58
  -61
  -65
  -69
  -74
  -78
  -83
  -88
  -93
  -98
  -103
  -109
  -115
  -122
Tax expense, $m
  3
  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
Net income, $m
  8
  -33
  -35
  -37
  -40
  -42
  -44
  -46
  -49
  -52
  -54
  -38
  -41
  -44
  -47
  -51
  -54
  -58
  -61
  -65
  -69
  -74
  -78
  -83
  -88
  -93
  -98
  -103
  -109
  -115
  -122

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2
  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
  602
  658
  718
  780
  846
  913
  984
  1,057
  1,133
  1,212
  1,295
  1,380
  1,469
  1,562
  1,658
  1,758
  1,863
  1,972
  2,086
  2,204
  2,328
  2,458
  2,593
  2,734
  2,882
  3,037
  3,199
  3,368
  3,546
  3,732
  3,926
Adjusted assets (=assets-cash), $m
  600
  658
  718
  780
  846
  913
  984
  1,057
  1,133
  1,212
  1,295
  1,380
  1,469
  1,562
  1,658
  1,758
  1,863
  1,972
  2,086
  2,204
  2,328
  2,458
  2,593
  2,734
  2,882
  3,037
  3,199
  3,368
  3,546
  3,732
  3,926
Revenue / Adjusted assets
  1.603
  1.602
  1.603
  1.604
  1.603
  1.604
  1.603
  1.604
  1.604
  1.604
  1.602
  1.603
  1.603
  1.602
  1.603
  1.604
  1.603
  1.603
  1.603
  1.603
  1.603
  1.603
  1.603
  1.603
  1.603
  1.603
  1.603
  1.603
  1.603
  1.603
  1.603
Average production assets, $m
  168
  185
  201
  219
  237
  256
  276
  297
  318
  340
  363
  387
  412
  438
  465
  493
  523
  553
  585
  618
  653
  689
  727
  767
  809
  852
  897
  945
  995
  1,047
  1,101
Working capital, $m
  90
  152
  166
  180
  195
  211
  227
  244
  262
  280
  299
  319
  339
  360
  383
  406
  430
  455
  481
  509
  537
  567
  599
  631
  665
  701
  738
  778
  818
  861
  906
Total debt, $m
  225
  256
  291
  328
  366
  405
  446
  488
  532
  578
  626
  676
  727
  781
  837
  895
  956
  1,019
  1,085
  1,154
  1,225
  1,300
  1,379
  1,461
  1,547
  1,636
  1,730
  1,829
  1,932
  2,039
  2,152
Total liabilities, $m
  350
  381
  416
  453
  491
  530
  571
  613
  657
  703
  751
  801
  852
  906
  962
  1,020
  1,081
  1,144
  1,210
  1,279
  1,350
  1,425
  1,504
  1,586
  1,672
  1,761
  1,855
  1,954
  2,057
  2,164
  2,277
Total equity, $m
  252
  276
  301
  328
  355
  384
  413
  444
  476
  509
  544
  580
  617
  656
  696
  739
  782
  828
  876
  926
  978
  1,032
  1,089
  1,148
  1,211
  1,276
  1,344
  1,415
  1,489
  1,567
  1,649
Total liabilities and equity, $m
  602
  657
  717
  781
  846
  914
  984
  1,057
  1,133
  1,212
  1,295
  1,381
  1,469
  1,562
  1,658
  1,759
  1,863
  1,972
  2,086
  2,205
  2,328
  2,457
  2,593
  2,734
  2,883
  3,037
  3,199
  3,369
  3,546
  3,731
  3,926
Debt-to-equity ratio
  0.893
  0.930
  0.970
  1.000
  1.030
  1.060
  1.080
  1.100
  1.120
  1.140
  1.150
  1.170
  1.180
  1.190
  1.200
  1.210
  1.220
  1.230
  1.240
  1.250
  1.250
  1.260
  1.270
  1.270
  1.280
  1.280
  1.290
  1.290
  1.300
  1.300
  1.310
Adjusted equity ratio
  0.417
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420
  0.420

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  8
  -33
  -35
  -37
  -40
  -42
  -44
  -46
  -49
  -52
  -54
  -38
  -41
  -44
  -47
  -51
  -54
  -58
  -61
  -65
  -69
  -74
  -78
  -83
  -88
  -93
  -98
  -103
  -109
  -115
  -122
Depreciation, amort., depletion, $m
  30
  34
  36
  37
  39
  40
  42
  44
  45
  47
  49
  32
  34
  37
  39
  41
  44
  46
  49
  52
  54
  57
  61
  64
  67
  71
  75
  79
  83
  87
  92
Funds from operations, $m
  56
  1
  0
  0
  -1
  -2
  -2
  -3
  -4
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -30
Change in working capital, $m
  8
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
Cash from operations, $m
  48
  -12
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -44
  -46
  -49
  -51
  -54
  -57
  -61
  -64
  -67
  -71
  -75
Maintenance CAPEX, $m
  0
  -14
  -15
  -17
  -18
  -20
  -21
  -23
  -25
  -26
  -28
  -30
  -32
  -34
  -37
  -39
  -41
  -44
  -46
  -49
  -52
  -54
  -57
  -61
  -64
  -67
  -71
  -75
  -79
  -83
  -87
New CAPEX, $m
  -5
  -17
  -17
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -48
  -50
  -52
  -55
Cash from investing activities, $m
  28
  -31
  -32
  -35
  -36
  -39
  -41
  -44
  -46
  -48
  -51
  -54
  -57
  -60
  -64
  -67
  -70
  -75
  -78
  -82
  -87
  -90
  -95
  -101
  -105
  -110
  -116
  -123
  -129
  -135
  -142
Free cash flow, $m
  76
  -43
  -46
  -49
  -53
  -56
  -60
  -63
  -67
  -71
  -76
  -80
  -85
  -89
  -94
  -100
  -105
  -111
  -117
  -123
  -130
  -137
  -144
  -152
  -160
  -168
  -177
  -186
  -196
  -206
  -217
Issuance/(repayment) of debt, $m
  -126
  33
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  78
  82
  86
  90
  94
  98
  103
  108
  113
Issuance/(repurchase) of shares, $m
  52
  58
  61
  64
  67
  70
  74
  77
  81
  85
  89
  74
  79
  83
  88
  93
  98
  104
  109
  115
  121
  128
  135
  142
  150
  158
  166
  175
  184
  193
  203
Cash from financing (excl. dividends), $m  
  -76
  91
  96
  100
  105
  109
  115
  119
  125
  131
  137
  124
  131
  137
  144
  151
  159
  167
  175
  184
  193
  203
  213
  224
  236
  248
  260
  273
  287
  301
  316
Total cash flow (excl. dividends), $m
  0
  48
  50
  51
  52
  54
  55
  56
  58
  59
  61
  44
  46
  47
  49
  51
  54
  56
  58
  61
  63
  66
  69
  72
  76
  79
  83
  87
  91
  95
  100
Retained Cash Flow (-), $m
  -55
  -58
  -61
  -64
  -67
  -70
  -74
  -77
  -81
  -85
  -89
  -74
  -79
  -83
  -88
  -93
  -98
  -104
  -109
  -115
  -121
  -128
  -135
  -142
  -150
  -158
  -166
  -175
  -184
  -193
  -203
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
 
  -10
  -11
  -13
  -15
  -17
  -19
  -21
  -23
  -26
  -28
  -30
  -33
  -36
  -39
  -42
  -45
  -48
  -51
  -54
  -58
  -62
  -66
  -70
  -74
  -78
  -83
  -88
  -93
  -98
  -104
Discount rate, %
 
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.42
  17.24
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
  28.09
  29.49
  30.97
  32.52
PV of cash for distribution, $m
 
  -9
  -9
  -10
  -10
  -11
  -11
  -10
  -10
  -9
  -9
  -8
  -7
  -6
  -6
  -5
  -4
  -3
  -3
  -2
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  91.2
  83.4
  76.5
  70.4
  65.0
  60.1
  55.7
  51.7
  48.0
  44.7
  42.3
  40.0
  37.8
  35.8
  33.9
  32.1
  30.4
  28.7
  27.2
  25.8
  24.4
  23.1
  21.9
  20.8
  19.7
  18.7
  17.7
  16.8
  15.9
  15.1

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 (DXPE)

Valuation Ratios
P/E Ratio 72.6
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 $962 million for the last fiscal year's total revenue generated by DXP Enterprises. The default revenue input number comes from 2016 income statement of DXP Enterprises. 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 9.6% 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 7.9%, whose default value for DXPE is calculated based on our internal credit rating of DXP Enterprises, 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.
    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 102.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 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 4.9% for DXP Enterprises.

Corporate tax rate of 27% is the nominal tax rate for DXP Enterprises. 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 17.5%.

Life of production assets of 12 years is the average useful life of capital assets used in DXP Enterprises 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 14.4%. 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 - $252 million for DXP Enterprises - 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 17.592 million for DXP Enterprises 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 at the current share price and the inputted number of shares is $0.6 billion.

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COMPANY NEWS

▶ DXP Enterprises Inc (DXPE): Time For A Financial Health Check   [Nov-13-17 08:25AM  Simply Wall St.]
▶ DXP Enterprises misses 3Q profit forecasts   [05:38AM  Associated Press]
▶ DXP Enterprises Reports 2017 Third Quarter Results   [Nov-02-17 06:24PM  Business Wire]
▶ DXP Enterprises Announces New ABL Revolver and Term Loan B   [Aug-29-17 04:00PM  Business Wire]
▶ DXP Enterprises posts 2Q profit   [Jul-25-17 09:16PM  Associated Press]
▶ 5 Stocks Set to Soar on New Analyst Coverage   [May-31-17 09:05AM  Zacks]
▶ DXP Enterprises posts 1Q profit   [04:06PM  Associated Press]
▶ DXP Enterprises posts 4Q profit   [07:16AM  Associated Press]
▶ DXP Enterprises Inc (DXPE) Hedge Funds Are Snapping Up   [Dec-09-16 12:15PM  at Insider Monkey]
Financial statements of DXPE
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