DXPE 52.22 (+8.91%)
US2333774071Industrial DistributionIndustrial Distribution

Last update on 2024-06-07

DXP Enterprises (DXPE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Detailed Piotroski F-Score analysis for DXP Enterprises (DXPE) in 2023, highlighting key financial metrics, profitability, liquidity, and operational efficiency.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 7

We're running DXP Enterprises (DXPE) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
1
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
0
Current Ratio is growing?
1
Number of shares not diluted?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
0

DXP Enterprises (DXPE) was evaluated based on the Piotroski F-Score, which ranges from 0 to 9 and measures a company's financial position through profitability, liquidity, and leverage criteria. DXPE scored a 7, indicating a mostly strong financial position. Key findings included positive net income and cash flow, increasing return on assets, strong operating cash flow compared to net income, and improved current ratio. However, concerns were noted with increased leverage and a slight decline in the asset turnover ratio.

Insights for Value Investors Seeking Stable Income

Given the Piotroski F-Score of 7, DXP Enterprises (DXPE) presents a promising investment with strong profitability, effective liquidity management, and improving operational efficiency. However, potential investors should be cautious of the company's increased debt levels and monitor their operational efficiency metrics like asset turnover ratio. Overall, it appears to be a solid candidate for further investment consideration.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of DXP Enterprises (DXPE)

Company has a positive net income?

The net income criterion checks whether the company has a positive net income in the most recent fiscal year. It's a key indicator of profitability.

Historical Net Income of DXP Enterprises (DXPE)

The net income of DXP Enterprises (DXPE) in 2023 is $68,812,000, which is positive. This results in adding 1 point to the Piotroski score. Reviewing the net income over the last 20 years, DXP Enterprises has experienced fluctuations, with notable losses in 2009 ($-42,412,000), 2013 ($-45,238,000), and 2014 ($-38,536,000). However, the recent trend has been improving with positive results since 2021. This steady improvement indicates a favorable trend in the company's profitability.

Company has a positive cash flow?

Cash Flow from Operations (CFO) indicates how much cash a company generates from its regular business activities. Positive CFO is crucial as it's a strong indicator that the company’s core operations are profitable, supporting sustainability and growth.

Historical Operating Cash Flow of DXP Enterprises (DXPE)

For the year 2023, DXP Enterprises reported a positive CFO of $106,222,000. This is a very positive sign, given the historical data. Over the last 20 years, the company has experienced both negative and variable cash flows, with a noteworthy surge in 2020 ($109,650,000) and a dip in 2015 ($12,544,000). The current year's number continues an upward trend from 2022 ($5,894,000), indicating improved operational efficiency.

Return on Assets (ROA) are growing?

The criterion analyzes the change in the Return on Assets (ROA) between two periods. ROA indicates how efficiently a company uses its assets to generate earnings. An increasing ROA is often a sign of improved operational efficiency.

Historical change in Return on Assets (ROA) of DXP Enterprises (DXPE)

The ROA of DXP Enterprises (DXPE) increased from 0.0499 in 2022 to 0.0621 in 2023, reflecting a positive change. This improvement indicates that the company has become more efficient in utilizing its assets to generate profit. Despite this increase, it's important to note that the ROA still falls substantially below the industry median ROA of 0.3023 for 2023. Therefore, while this trend is positive for DXP Enterprises, the company should strive for further operational improvements to compete more effectively within its industry.

Operating Cashflow are higher than Netincome?

Operating Cash Flow (OCF) exceeding Net Income indicates strong earnings quality, highlighting that income is backed by robust cash flow from primary business activities.

Historical accruals of DXP Enterprises (DXPE)

In 2023, DXP Enterprises reported an operating cash flow of $106.22 million, which is significantly higher than its net income of $68.81 million. This disparity underscores that the company's earnings are not merely accounting profits but are also supported by substantial cash inflows. Analyzing historical data, the company's OCF saw fluctuations from as low as -$1.24 million in 2005 to $106.22 million in 2023, while net income varied from -$42.41 million in 2009 to $68.81 million in 2023. This trend of higher OCF relative to net income is consistently observed in positive income years, highlighting a strong earnings quality. Thus, 1 point is warranted in this analysis.

Liquidity of DXP Enterprises (DXPE)

Leverage is declining?

Change in leverage measures the variation in a company's use of debt financing year over year and assesses if a company is taking on more or less risk.

Historical leverage of DXP Enterprises (DXPE)

For DXP Enterprises (DXPE), the leverage ratio has increased from 0.4332 in 2022 to 0.4714 in 2023. This reflects a higher use of debt financing in the most recent year, contrary to what a positive indicator would require as per the Piotroski analysis. A rising leverage implies increased financial risk and interest obligations, negatively impacting the company's financial stability. Historically, DXPE's leverage has fluctuated, yet the 2023 rate marks a two-decade high, flagging potential concerns about the company's dependency on debt. Thus, no point is awarded for this criterion.

Current Ratio is growing?

A comparison of DXPE's Current Ratio over time can provide insight into the company's short-term liquidity. The Current Ratio, which is calculated by dividing current assets by current liabilities, indicates if the company can cover its short-term obligations with its short-term assets. An increasing Current Ratio over time generally shows better liquidity.

Historical Current Ratio of DXP Enterprises (DXPE)

The Current Ratio for DXP Enterprises (DXPE) has increased from 2.4242 in 2022 to 2.8932 in 2023, signifying an improvement in the company's short-term liquidity. This growth trend is a positive indicator, adding 1 point to Piotroski's F-Score. Historical data of the Current Ratio shows a fluctuating trend over the past 20 years with significant improvement starting from 2016 when the ratio jumped from 1.6009 to 2.5469 in 2017, illustrating considerable improvement above industry medians. For instance, in 2023, DXPE's Current Ratio of 2.8932 surpasses the industry median of 2.4086, suggesting DXPE has a healthier balance sheet in comparison to its peers.

Number of shares not diluted?

Change in Shares Outstanding is indicative of a company's capital structure changes. An increase may signal equity dilution, whereas a decrease could indicate buybacks.

Historical outstanding shares of DXP Enterprises (DXPE)

For DXP Enterprises (DXPE), the Outstanding Shares were 17,690,069 in 2022 but dropped to 0 in 2023. This suggests a massive reduction in outstanding shares. Reviewing the data for the last 20 years, we observe a fluctuating trend, with significant increases and decreases at various intervals. This sharp reduction in shares is quite unusual, potentially attributed to significant corporate actions such as buybacks or going private initiatives. Therefore, we add 1 point as Outstanding Shares decreased dramatically and unpredictably in 2023.

Operating of DXP Enterprises (DXPE)

Cross Margin is growing?

Gross margin measures the percentage of revenue that exceeds the cost of goods sold. It indicates the financial health and pricing power of a company.

Historical gross margin of DXP Enterprises (DXPE)

Comparing the Gross Margin of 0.301 in 2023 with 0.285 in 2022 for DXP Enterprises (DXPE), the Gross Margin has indeed increased in 2023. This upward trend is beneficial for the company, as it signifies an improvement in cost efficiency or pricing power. Over the past 20 years, DXPE's gross margin has ranged between 0.2455 and 0.301. While the industry's median gross margin for 2023 stands at 0.3023, DXPE's gross margin of 0.301 aligns closely but is slightly below this median, highlighting that while DXPE is performing well, there might still be room for improvement to meet or exceed industry standards.

Asset Turnover Ratio is growing?

The change in Asset Turnover evaluates how efficiently a company uses its assets to generate sales. An increase signifies better efficiency, potentially leading to higher profitability.

Historical asset turnover ratio of DXP Enterprises (DXPE)

In 2023, the Asset Turnover for DXP Enterprises (DXPE) was 1.5159, compared to 1.5333 in 2022. This indicates a slight decrease of 0.0174 in the Asset Turnover Ratio. Therefore, according to Piotroski Analysis, this metric would not garner any points, denoting a decline in operational efficiency. Analyzing the larger trend, the company's Asset Turnover has shown a general decline from 3.087 in 2003 to its current level, suggesting a long-term challenge in maintaining asset utilization efficiency.


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