Over the past six months, Standex’s stock price fell to $166.64. Shareholders have lost 6.9% of their capital, which is disappointing considering the S&P 500 has climbed by 7.6%. This may have investors wondering how to approach the situation.
Is there a buying opportunity in Standex, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Standex Not Exciting?
Despite the more favorable entry price, we don't have much confidence in Standex. Here are three reasons why SXI doesn't excite us and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Standex’s 3.4% annualized revenue growth over the last five years was sluggish. This fell short of our benchmark for the industrials sector. 
2. Recent EPS Growth Below Our Standards
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Standex’s EPS grew at an unimpressive 5.9% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its flat revenue and tells us management responded to softer demand by adapting its cost structure.
3. Free Cash Flow Margin Dropping
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Standex’s margin dropped by 3.2 percentage points over the last five years. If its declines continue, it could signal increasing investment needs and capital intensity. Standex’s free cash flow margin for the trailing 12 months was 5.1%.
Final Judgment
Standex isn’t a terrible business, but it isn’t one of our picks. After the recent drawdown, the stock trades at 18.9× forward P/E (or $166.64 per share). Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We're fairly confident there are better investments elsewhere. We’d recommend looking at our favorite semiconductor picks and shovels play.
Stocks We Like More Than Standex
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