<div id="readability-page-1"><div><h3>Key Insights</h3><ul><li> The projected fair value for DXP Enterprises is US$171 based on 2 Stage Free Cash Flow to Equity </li> <li> DXP Enterprises' US$115 share price signals that it might be 33% undervalued </li> </ul><p>Does the December share price for DXP Enterprises, Inc. (NASDAQ:DXPE) reflect what it's really worth? Today, we will estimate the stock's intrinsic value  by projecting its future cash flows and then discounting them to today's value.  We will use the Discounted Cash Flow (DCF) model on this occasion.  It may sound complicated, but actually it is quite simple!</p><p> We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios.  For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you. </p><p>This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.</p><h2> The Method </h2> <p> We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate.  To start off with, we need to estimate the next ten years of cash flows.   Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.  </p><p> A DCF is all about the idea that a dollar in the future is less valuable than a dollar today,  so we need to discount the sum of these future cash flows to arrive at a present value estimate: </p><h4> 10-year free cash flow (FCF) estimate </h4><table><tbody><tr><td> </td><td><strong>2026</strong></td><td><strong>2027</strong></td><td><strong>2028</strong></td><td><strong>2029</strong></td><td><strong>2030</strong></td><td><strong>2031</strong></td><td><strong>2032</strong></td><td><strong>2033</strong></td><td><strong>2034</strong></td><td><strong>2035</strong></td></tr><tr><td><strong> Levered FCF ($, Millions) </strong></td><td>US$106.6m</td><td>US$121.0m</td><td>US$148.5m</td><td>US$159.6m</td><td>US$168.6m</td><td>US$176.9m</td><td>US$184.7m</td><td>US$192.2m</td><td>US$199.5m</td><td>US$206.8m</td></tr><tr><td><strong>Growth Rate Estimate Source</strong></td><td>Analyst x2</td><td>Analyst x2</td><td>Analyst x1</td><td>Analyst x1</td><td>Est @ 5.62%</td><td>Est @ 4.91%</td><td>Est @ 4.42%</td><td>Est @ 4.07%</td><td>Est @ 3.83%</td><td>Est @ 3.66%</td></tr><tr><td><strong> Present Value ($, Millions) Discounted @ 8.8% </strong></td><td>US$97.9</td><td>US$102</td><td>US$115</td><td>US$114</td><td>US$111</td><td>US$107</td><td>US$102</td><td>US$97.8</td><td>US$93.3</td><td>US$88.9</td></tr></tbody></table><p><i>(&#34;Est&#34; = FCF growth rate estimated by Simply Wall St)</i><br/><strong>Present Value of 10-year Cash Flow (PVCF)</strong> = US$1.0b</p><p> The second stage is also known as Terminal Value, this is the business's cash flow after the first stage.  The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 3.3%. We discount the terminal cash flows to today's value at a cost of equity of 8.8%. </p><p><strong>Terminal Value (TV)</strong>= FCF<sub>2035</sub> × (1 + g) ÷ (r – g) = US$207m× (1 + 3.3%) ÷ (8.8%– 3.3%) = US$3.8b</p><p><strong>Present Value of Terminal Value (PVTV)</strong>= TV / (1 + r)<sup>10</sup>= US$3.8b÷ ( 1 + 8.8%)<sup>10</sup>= US$1.7b</p><p> The total value, or equity value, is then the sum of the present value of the future cash flows,  which in this case is US$2.7b.  In the final step we divide the equity value by the number of shares outstanding.  Relative to the current share price of US$115, the company appears   quite undervalued    at a 33% discount to where the stock price trades currently.   Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind. </p><figure><img height="760" src="https://imageproxy.pbkrs.com/https://images.simplywall.st/asset/chart/382071-dcf-1-dark-2/1766485125815?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="1706" original-src="https://imageproxy.pbkrs.com/https://images.simplywall.st/asset/chart/382071-dcf-1-dark-2/1766485125815"/><figcaption>NasdaqGS:DXPE Discounted Cash Flow December 23rd 2025</figcaption></figure> <h2> The Assumptions </h2><p> We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows.  If you don't agree with these result, have a go at the calculation yourself and play with the assumptions.  The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance.  Given that we are looking at DXP Enterprises as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt.  In this calculation we've used 8.8%, which is based on a levered beta of 1.202. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. </p> <p><span> Check out our latest analysis for DXP Enterprises </span></p><h3>SWOT Analysis for DXP Enterprises</h3><div><div><p><strong>Strength</strong></p><ul><li>Earnings growth over the past year exceeded the industry.</li></ul> <ul> See DXPE's revenue and earnings trends.</ul> </div><div><p><strong>Weakness</strong></p><ul><li>Earnings growth over the past year is below its 5-year average.</li></ul> <ul><li>Interest payments on debt are not well covered.</li></ul></div><div><p><strong>Opportunity</strong></p><ul><li>Annual earnings are forecast to grow faster than the American market.</li></ul> <ul><li>Good value based on P/E ratio and estimated fair value.</li></ul> </div><div><p><strong>Threat</strong></p><ul><li>Debt is not well covered by operating cash flow.</li></ul> <ul>Is DXPE well equipped to handle threats?</ul> </div></div><h2> Next Steps: </h2><p> Whilst important, the DCF calculation  ideally won't be the sole piece of analysis you scrutinize for a company.  It's not possible to obtain a foolproof valuation with a DCF model.  Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued.  For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result.   Why is the intrinsic value higher than the current share price?   For DXP Enterprises, there are three  additional  aspects  you should explore: </p><ol> <li> <strong>Risks</strong>: For example, we've discovered <strong>2 warning signs for DXP Enterprises</strong> (1 is concerning!) that you should be aware of before investing here. </li> <li> <strong>Management</strong>:Have insiders been ramping up their shares to take advantage of the market's sentiment for DXPE's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors. </li><li> <strong>Other High Quality Alternatives</strong>: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! </li> </ol><p> PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NASDAQGS every day. If you want to find the calculation for other stocks just search here.</p><div><p>Mobile Infrastructure for Defense and Disaster</p><p>The next wave in robotics isn't humanoid. Its fully autonomous towers delivering 5G, ISR, and radar in under 30 minutes, anywhere.</p><p>Get the investor briefing before the next round of contracts</p><p><span>Sponsored On Behalf of CiTech</span></p></div></div></div>

DXPE

<p>DXP Enterprises, Inc. (NASDAQ:DXPE) is estimated to be 33% undervalued with a projected fair value of $171 per share, compared to its current price of $115. The valuation uses a 2-stage Free Cash Flow to Equity model, discounting future cash flows at 8.8%. The analysis highlights the importance of assumptions in DCF models and suggests potential undervaluation of the stock.</p>

An Intrinsic Calculation For DXP Enterprises, Inc. (NASDAQ:DXPE) Suggests It's 33% Undervalued