Q: Time for an update on DXT? Time to start a position?
5i Research Answer:
DXT had a solid 3Q, with earnings 44% ahead of estimates and sales 12% better. EPS rose 162%. Sales rose 15%. All business units reported improved performance. DXT bought back $1.1M of its shares. The stock has not done much this year, but offers a 6.2% yield. Valuation is low at 10X earnings. Investors are concerned about debt and a possible recession. Debt did increase $40M in the first nine months of 2023, to $163M, about 3X cash flow. About 14% earnings growth is expected next year. We would consider it OK, but it is economically sensitive, and the balance sheet plus its relatively small size are additional risks here.