Why DXP Enterprises is a Top Growth Stock for Investors

Investors looking for promising growth stocks often chase companies with strong financials that can catch the market’s eye and deliver impressive returns. Yet, discovering the right growth stock can be quite challenging.

These stocks typically come with higher risk and volatility. In fact, investing in a stock whose growth potential has already peaked could lead to considerable losses.

Fortunately, the Zacks Growth Style Score, part of the broader Zacks Style Scores system, simplifies the search for promising growth stocks. This system evaluates a company’s true growth potential beyond conventional metrics.

Currently, Zacks recommends DXP Enterprises (DXPE) as a standout option. This company not only boasts a favorable Growth Score but also holds a top Zacks Rank.

Research indicates that stocks with strong growth characteristics consistently outperform the market. Stocks that feature a Growth Score of A or B, combined with a Zacks Rank of #1 (Strong Buy) or #2 (Buy), tend to yield even better returns.

Let’s examine three key reasons why DXP Enterprises is an attractive growth stock right now.

Strong Earnings Growth

Earnings growth is one of the most critical indicators for stock investors. Companies showing rapid profit increases often attract significant interest. For growth investors, double-digit earnings growth is ideal, signaling robust future prospects and potential stock price increases.

DXP Enterprises has a remarkable historical EPS growth rate of 42.3%. More importantly, analysts project its EPS will grow by 22.6% this year, a figure that outpaces the industry average of 6.4%.

Impressive Cash Flow Growth

Cash flow serves as the foundation of any business, but for growth-oriented companies, accelerated cash flow growth is crucial. High cash accumulation allows companies to invest in new initiatives without resorting to costly external financing.

Currently, DXP Enterprises boasts a year-over-year cash flow growth rate of 27.7%, significantly higher than its peers. In comparison, the industry average stands at just 9.6%.

While it’s essential to assess the current cash flow growth, the historical rate also provides valuable context. Over the past 3-5 years, the company’s cash flow growth rate averaged 10.7%, compared to the industry’s 8.2%.

Favorable Earnings Estimate Revisions

The metrics discussed earlier can be reinforced by examining the trend in earnings estimate revisions. A positive trend is particularly encouraging, as research suggests a strong link between these revisions and stock price movements in the near term.

Recently, the earnings estimates for DXP Enterprises have been adjusted upward. The Zacks Consensus Estimate for the current year has increased by 14.3% over the past month.

Conclusion

Given the positive earnings estimate revisions, DXP Enterprises has earned a Zacks Rank of #1, alongside a Growth Score of A, based on numerous favorable factors discussed here.

For those interested, you can find the full list of today’s Zacks #1 Rank (Strong Buy) stocks here. This combination signifies that DXP Enterprises could outperform its peers, making it a solid option for growth investors.

Experts Choose Their Top Pick to Skyrocket

From a pool of thousands of stocks, five Zacks experts have spotlighted their favorites, each anticipated to surge by 100% or more in the coming months. Among these, Director of Research Sheraz Mian has selected one that he believes has the most explosive potential.

This select company appeals to millennial and Gen Z consumers, having generated nearly $1 billion in revenue just last quarter. Given a recent price pullback, now presents an opportune moment to invest. While not every Zacks pick succeeds, this one could vastly exceed past winners like Nano-X Imaging, which soared +129.6% in just over nine months.

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.