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Buying shares in the best businesses can build meaningful wealth for you and your family. And highest quality companies can see their share prices grow by huge amounts. Don't believe it? Then look at the DXP Enterprises, Inc. (NASDAQ:DXPE) share price. It's 516% higher than it was five years ago. If that doesn't get you thinking about long term investing, we don't know what will. But it's down 4.1% in the last week. But note that the broader market is down 4.0% since last week, and this may have impacted DXP Enterprises' share price. We love happy stories like this one. The company should be really proud of that performance!
In light of the stock dropping 4.1% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over half a decade, DXP Enterprises managed to grow its earnings per share at 16% a year. This EPS growth is slower than the share price growth of 44% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on DXP Enterprises' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's good to see that DXP Enterprises has rewarded shareholders with a total shareholder return of 46% in the last twelve months. That's better than the annualised return of 44% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand DXP Enterprises better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with DXP Enterprises (including 1 which is significant) .
