DXP Enterprises, Inc. (DXPE): what the price assumes

In the published model solve dated 2026-Q2, anchored at $185.92, DXP Enterprises, Inc. (DXPE) is priced for +15.7% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/DXPE

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 9.4% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.4%); the inversion above states its own rate.

Per-Model Detail (n=15)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

• Leverage is the governor on the compounding story: 845.9 million dollars was outstanding under the senior secured term loan at the end of 2025, which puts net debt near 3.7 times operating profit with interest coverage around 2.8.
• The company calls itself "the largest distributor of rotating equipment in North America", and roughly 68% of revenue comes from the Service Centers network selling maintenance, repair and operating supplies into industrial, energy, chemical and water end markets.
• Second-quarter results are due August 6, following a March quarter in which sales rose 9.5% with three acquisitions closing inside it.

Bull Case

Start with what is being paid rather than what is being bought. Today's price works out to roughly 19 times company-wide operating profit, which requires something like 16.7% a year of operating-profit growth for five years. Written down that way it reads as a demanding assumption for a distributor. Then look at what the distributor has actually been doing, and the number stops looking like a leap.

The underlying business is one of the least glamorous in the market and one of the stickiest. DXP distributes maintenance, repair and operating products, equipment and service into general industrial, energy, food and beverage, chemical, transportation and water end markets, a line of work it has been in since its predecessor SEPCO Industries. Nobody wins in MRO distribution on product, because the product is the manufacturer's. They win on proximity, inventory and the willingness to take a problem off the customer's desk, which is exactly how the 10-K describes the offer: large buyers "are able to outsource all or most of those needs to us", while smaller ones get "one-stop sourcing without the commitment" of a full outsourcing contract.

That model spreads risk in a way the headline cyclicality obscures. The filing states plainly that "No customer accounts for 10% or more of our revenues". For a business selling into refineries, chemical plants and municipal water systems, having no single account that can move the year is a structural advantage most industrial suppliers cannot claim, and it is the reason a downturn in one end market shows up as a dent rather than a hole.

The growth engine is running on both cylinders. Service Centers sales rose 10.9 million dollars, or 3.3%, in the March 2026 quarter, which the filing attributes to gains in the Ohio River Valley, California and the South East, and the Service Centers and pumping segments together turned over approximately 456.6 million dollars in that quarter. On the acquired side, 56.3 million dollars of goodwill was assigned to the pumping segment from deals closed in the same three months, attributed to "expected synergies and the assembled workforce of the entities". Gross profit as a percentage of sales rose about 67 basis points across 2025, an improvement the 10-K credits to that same pumping segment.

The mix matters more than it looks. The pumping business builds custom pump packages and remanufactures pumps, and the 10-K notes it "also provides a comprehensive suite of products and services to the water and wastewater treatment market in the United States". Water infrastructure spending does not follow the oil cycle, and a segment that improves group gross margin while diversifying the demand behind it is the most useful thing a cyclical distributor can own. Underneath all of it sits a return on equity near 17.2% on book value of 31.29 dollars a share, which is the arithmetic that makes a five-year compounding assumption arguable rather than fanciful.

Bear Case

Being the largest distributor of rotating equipment in North America is a claim about market position, and market position in distribution is supposed to show up as margin. This is where the bear case starts, because it does not. DXP converts roughly 8.6% of revenue into operating profit. AIT earns 10.9% on sales of 4.84 billion dollars, GWW earns 14.2% on 18.38 billion, and FAST earns 20.2% on 8.44 billion while growing 10.9%. On that measure DXP sits closest to MSM, which earns 8.5% on 3.91 billion dollars of revenue growing 4.4%. Scale in this industry is supposed to buy purchasing leverage and pricing discipline. Whatever the leading position in rotating equipment is worth, it is not currently visible in the profit line.

The growth is also being bought rather than compounded. A single quarter's acquisitions added 56.3 million dollars of goodwill to the pumping segment, and behind that sits 845.9 million dollars of senior secured term loan running to October 13, 2030 with quarterly principal payments of 0.25%. Net debt stands near 3.7 times operating profit, and interest coverage near 2.8 leaves considerably less room than a lightly levered distributor would have. A roll-up borrowing to buy revenue has to keep the margin it acquired, and the most recent evidence is uncomfortable: in the March quarter sales rose 9.5% while per-share earnings on the company's own adjusted measure did not move at all.

That is the fact to hold against what the price assumes. Roughly 16.7% a year of operating-profit growth for five years is the requirement, and only about 42% of comparable fast growers held a pace like that for five years. Worse, the requirement barely survives contact with a different discount rate: adding one percentage point to the return a buyer demands moves the implied growth by nearly seven points. There is not much distance in that arithmetic between a compounder and a leveraged cyclical distributor, and the price is firmly on one side of it.

The end markets supply the mechanism by which the assumption fails. The 10-K is candid that certain served industries "such as the oil and gas industry, are subject to volatility driven by a variety of factors" while others "such as the petrochemical industry and the construction industry, are cyclical and materially affected by changes in the U.S. and global economy". Where sales have fallen, the filing points directly at reduced activity among oil and gas customers. A downturn in industrial capital spending does two things at once here: it compresses the operating profit that the growth assumption is measured against, and it raises the leverage ratio measured against that same shrinking number.

None of this is a solvency alarm. No customer represents a tenth of revenue, the term loan does not mature until 2030, and the covenant is a secured leverage test rather than a coverage trigger. The bear case is narrower and more likely than a crisis: that a good distributor bought at a compounder's multiple turns out to be a good distributor.

Valuation

The methods split about as cleanly here as they ever do. Only the forward-growth approaches reach today's price. The asset-value family, the peer-multiple family and the earnings-power family all land below it, the last of those by the widest distance. When the static frames sit under the price and only the growth lens defends it, the premium being paid is for durable compounding that a backward-looking method structurally cannot see. Naming that honestly is more useful than arguing about which method is right.

The assumption itself is specific. Roughly 19 times company-wide operating profit works backward to about 16.7% a year of operating-profit growth sustained for five years. Of the comparable fast growers this can be measured against, about 42% held a pace like that for five years. So the bet is not outlandish, and it is not comfortable either. It is close to a coin flip on the base rate, priced as though it lands.

The earnings-power reading is worth understanding rather than waving away, because the reason it sits so far below the price says something real. It capitalizes a five-year average operating profit near 0.13 billion dollars, with no growth credited at all, against roughly 0.173 billion earned on a trailing basis. For a company that has grown by buying other companies, a five-year average understates the current business by construction. That is the point: the price needs the acquired growth to be permanent, because the version of this company that stops acquiring is valued somewhere else entirely.

Peer economics explain why the multiple lens also falls short. AIT earns a 10.9% operating margin on revenue of 4.84 billion dollars growing 7.5%, and MSM earns 8.5% on 3.91 billion growing 4.4%. DXP's roughly 8.6% trailing operating margin sits comfortably inside that band. What sits outside it is the multiple, and no peer number in the cohort closes that gap on its own.

Solvency sets the outer boundary and is more relevant here than in most distribution names. At the end of 2025, 845.9 million dollars was outstanding under the senior secured term loan, amortizing at 0.25% quarterly with the balance due October 13, 2030, against liquid assets near 213 million dollars. Net debt runs about 3.7 times operating profit and interest is covered around 2.8. The covenant is a secured leverage ratio measured against consolidated secured debt net of unrestricted cash, and the filing caps the cash credited in that calculation at 330 million dollars. What all of that means in practice is straightforward: the interest bill is fixed and the operating profit it is measured against is cyclical, so the leverage ratio moves whether or not the company borrows another dollar.

Catalysts

Second-quarter results are scheduled for August 6, 2026. The comparison they land against is a March quarter reported on May 7 with revenue of $521.7 million against $476.6 million a year earlier. Full-year 2025 results, reported February 26, 2026, were presented as record sales for the company.

Deal flow has not slowed. Three acquisitions closed inside the March quarter, and on June 17 the company completed the purchase of General Repair Service, a Minnesota business founded in 1955 operating in repair services. Each of these is small on its own. Collectively they are the growth strategy, which is why the goodwill assigned per quarter and the margin the acquired businesses carry are the numbers to follow rather than the deal count.

Financing capacity is the enabling condition, and it moved in July. On July 9 the company announced a new asset-based lending revolver. The Q1 filing describes the asset-based facility and the term loan together as what funds capital expenditure and strategic acquisitions, so a refreshed revolver is less a headline than a statement about how much more acquiring the balance sheet is expected to do. The August print is where the answer starts showing up, in the margin the acquired revenue arrives with.

Peer Cohorts (Per Segment, With Filing Citations)

Service Centers (SC) (reported)

• AIT (APPLIED INDUSTRIAL TECHNOLOGIES, INC.)
• FY2025 10-K: …no change in the composition of either reportable segment. In fiscal 2025, our Service Center segment represented 66% of our total sales, while our Engineered Solutions segment represented 34% of our total sales. Service Center . Our Service Center segment includes our MRO-focused distribution operations across North…
• FY2025 10-K: …and competitive advantage is attributable to the comprehensive set of services and solutions we provide, which we view as critical given the technical nature and application of our core product offering of motion, power, control, and automation technologies. The foundation of our service capabilities lies with our…
• MSM (MSC INDUSTRIAL DIRECT CO., INC.)
• FY2025 10-K: …more efficient. Certain of our customer fulfillment centers also utilize robotic packing solutions and order-picking systems that improve productivity and associate safety while reducing energy consumption and saving space. Some specialty or custom items and very large orders are shipped directly from the…
• FY2025 10-K: …a real-time basis of product availability; recommend substitute products; verify credit information; receive special, custom or manufacturer direct orders; cross-check inventory items using previously entered customer product codes; and arrange or provide technical assistance. We offer: customized billing; customer…
• DNOW (DNOW INC.)
• FY2025 10-K: LNG, RNG facilities and other downstream energy processors. We also serve energy customers involved in the separation, transfer and disposal of produced water as well as energy transition such as carbon capture, utilization and storage ("CCUS"), direct air capture ("DAC") and offshore wind. In addition, we provide our…
• FY2025 10-K: …for customer requirements, weld segments of pipe to the intake/outtake openings of large pipeline valves, add extensions to the valve controls while installing actuators to the valve, hydrotest the valves, paint or coat the valves, x-ray the welds and deliver complete valve/actuation assemblies to our customers for…
• WCC (WESCO International, Inc.)
• FY2025 10-K: …segment information for the years ended December 31, 2024 and 2023 for the EES and CSS reportable segments has been recast to conform to the current year presentation. The following is a description of each of the Company's reportable segments and their business activities. Electrical & Electronic Solutions The EES…
• FY2025 10-K: …agreements with more than 450 preferred suppliers and approximately 68% of our purchases are made pursuant to these arrangements. We offer a wide range of sustainable products from the world's leading manufacturers and help our customers determine solutions to meet their sustainability goals. Key categories include…
• GWW (W.W. GRAINGER, INC.)
• FY2025 10-K: …through its KeepStock® program which provides onsite industry expertise, flexible storage solutions and intuitive customer tools powered by proprietary processes and technology. 6 In the Endless Assortment segment, orders are placed primarily through online channels. Zoro leverages the High-Touch Solution N.A.'s DC…
• FY2025 10-K: …approximately one million square feet. Grainger believes that its properties are generally in excellent condition, well maintained and suitable for the conduct of business. The following table includes Grainger's material facilities: Location Facility and Use (8) Size in Square Feet (in thousands) Segment U.S. (1)…
• FAST (FASTENAL CO)
• FY2025 10-K: …locations, and from different geographic areas. It is also derived from supplier information and from customer demographic information. Our computer system monitors the inventory level for all stock items and triggers replenishment, or prompts a buyer to purchase, as necessary, based on an established minimum-maximum…
• FY2025 10-K: …centers are located so as to permit deliveries of two to five times per week to our selling locations using our trucks and overnight delivery by surface common carrier, with approximately 79% of our North American selling locations receiving service four to five times per week. The distribution centers in Indiana and…

Innovative Pumping Solutions (IPS) (reported)

• AIT (APPLIED INDUSTRIAL TECHNOLOGIES, INC.)
• FY2025 10-K: …product fabrication and repair, and inventory management solutions. We also provide analysis and measurement of productivity improvement and cost savings potential from these services through our Applied Documented Value-Added ® (DVA ® ) reports. The segment includes operations focused on certain end markets and…
• FY2025 10-K: …Analysis of Financial Condition and Results of Operations." This information is incorporated here by reference. INDUSTRY POSITION AND VALUE PROPOSITION We serve a segment of the industrial market that requires technical expertise and service as our products and solutions are directly tied to companies' production…
• DNOW (DNOW INC.)
• FY2025 10-K: …distribution industry is highly fragmented, with both large global participants and numerous smaller regional and local competitors. As a supply chain partner, we deliver value by managing vendor networks and aggregating, stocking and distributing a broad assortment of products from numerous manufacturers near…
• FY2025 10-K: …downstream and industrial companies. • Gas Products. Natural gas distribution products include risers, meters, polyethylene pipe and fittings and various other components and industrial supplies used primarily in the distribution of natural gas to residential and commercial customers. • Pumps, Production and Process…
• FELE (FRANKLIN ELECTRIC CO., INC.)
• FY2025 10-K: …compounded annual sales growth in developing regions in recent years. Water Systems competes in each of its targeted markets based on product design, quality, performance, availability and price. The Company's principal competitors in the specialty water products industry are Grundfos Management A/S, Pentair, Inc.…
• FY2025 10-K: …for the Company's growth as a global provider of water and energy systems, through geographic expansion and product line extensions, leveraging its global platform and competency in system design, all while consistently offering the best value to its customer. Markets and Applications The Company's business consists…
• GTLS (CHART INDUSTRIES, INC.)
• FY2025 10-K: …the storage, distribution, vaporization, and application of industrial gases and certain hydrocarbons. Our Heat Transfer Systems segment supplies mission critical engineered equipment and systems used in the recovery, separation, liquefaction, and purification of hydrocarbons, LNG and industrial gases that span…
• FY2025 10-K: …manufacture bulk and packaged gas cryogenic solutions for the storage, distribution, vaporization, and application of industrial gases. Our products span the entire spectrum of industrial gas demand from small customers requiring cryogenic packaged gases to large users requiring custom engineered cryogenic storage…
• MWA (MUELLER WATER PRODUCTS, INC.)
• FY2025 10-K: …is in the process of transitioning from manually read meters to electronically read meters; however, we expect this transition to be relatively slow and that many end users will be reluctant to adopt brands other than their historically preferred brand. Our principal competitors in water metering products and systems…
• FY2025 10-K: …to offer non-invasive leak detection and pipe condition assessment services is a key competitive advantage. With our Singer Valve and i2O products, we provide a range of intelligent water solutions including pressure control valves, advanced pressure management, network analytics, event management and data logging.…

Supply Chain Services (SCS) (reported)

• AIT (APPLIED INDUSTRIAL TECHNOLOGIES, INC.)
• FY2025 10-K: …Analysis of Financial Condition and Results of Operations." This information is incorporated here by reference. INDUSTRY POSITION AND VALUE PROPOSITION We serve a segment of the industrial market that requires technical expertise and service as our products and solutions are directly tied to companies' production…
• FY2025 10-K: …network, and an addressable market of approximately $80 billion and growing, we believe our cross-selling initiative represents a significant long-term growth opportunity. This includes accelerating our ability to expand with strategic accounts and penetrate faster growing market verticals such as food & beverage,…
• MSM (MSC INDUSTRIAL DIRECT CO., INC.)
• FY2025 10-K: …more efficient. Certain of our customer fulfillment centers also utilize robotic packing solutions and order-picking systems that improve productivity and associate safety while reducing energy consumption and saving space. Some specialty or custom items and very large orders are shipped directly from the…
• FY2025 10-K: …management solutions; our catalogs; our brochures; and our customer care centers, customer fulfillment centers, regional inventory centers and warehouses. We carry many of the products we sell in our inventory, so that orders for these in-stock products are processed and fulfilled the day the order is received. We…
• GWW (W.W. GRAINGER, INC.)
• FY2025 10-K: …satisfied when control of the product is transferred to the customer per the arranged shipping terms. Some Company contracts contain a combination of product sales and services, which are distinct and accounted for as separate performance obligations and are satisfied when the services are rendered. Total service…
• FY2025 10-K: …through its KeepStock® program which provides onsite industry expertise, flexible storage solutions and intuitive customer tools powered by proprietary processes and technology. 6 In the Endless Assortment segment, orders are placed primarily through online channels. Zoro leverages the High-Touch Solution N.A.'s DC…
• FAST (FASTENAL CO)
• FY2025 10-K: …at a very competitive cost. Manufacturing and Support Services Operations In 2025 , approximately 96% of our consolidated net sales were attributable to products manufactured by other companies to industry standards or to customer specific requirements. The remaining 4% related to products manufactured, modified, or…
• FY2025 10-K: …locations, and from different geographic areas. It is also derived from supplier information and from customer demographic information. Our computer system monitors the inventory level for all stock items and triggers replenishment, or prompts a buyer to purchase, as necessary, based on an established minimum-maximum…
• WCC (WESCO International, Inc.)
• FY2025 10-K: …segment information for the years ended December 31, 2024 and 2023 for the EES and CSS reportable segments has been recast to conform to the current year presentation. The following is a description of each of the Company's reportable segments and their business activities. Electrical & Electronic Solutions The EES…
• FY2025 10-K: …communications projects. Specific applications include projects for data centers, hospitals, public transit, waste water treatment facilities, EV charging stations, and renewable and solar power plants. OEM customers require products used in the manufacturing of automotive, industrial, medical, transportation,…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.