Standex International (NYSE:SXI): Navigating Challenges to Growth
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Standex International (NYSE:SXI): Navigating Challenges to Growth

Story Highlights

With a history of strategic acquisitions and robust earnings growth, Standex International looks to overcome minor recent setbacks. Given the company’s promising growth outlook, the stock trades at a potentially attractive valuation.

Standex International (NYSE:SXI) is a diversified American multinational with a footprint in various industries around the globe. Despite hitting a slight roadblock recently, with Q2 2024 revenues undershooting expectations, the company remains optimistic about navigating challenges to its growth. SXI stock has enjoyed a run-up of 47.2% in the past year. Yet in terms of valuation, Standex trades at an arguably attractive level, with Wall Street analysts bullish about the stock’s potential.

Standex Story

Standex, defined as a “mini-conglomerate” within the industrial sector, has been demonstrating consistent growth. It has carried out seven acquisitions over the past eight years, the latest being the acquisition of Japan-based Sanyu Switch Co., Ltd, a manufacturer of electronic connectors.

Like most of its other acquisitions, the company expects the new addition to be accretive to its earnings and achieve a double-digit return on invested capital in the first year of ownership. 

In fact, Standex has posted eleven consecutive quarters of impressive adjusted operating margin performance, reflecting the continued solid execution of successfully integrating investments in high-growth opportunities.

Navigating Current Challenges

Despite Standex’s track record of successful additions, recent performance has been mixed. The company’s Q2 2024 financial results, reported on February 1, 2024, showed revenue missed analysts’ estimates ($178.40 million versus consensus of $180.25 million). Despite the softer top line, the company achieved an adjusted gross margin of 40.3% and adjusted operating margin of 16.1%. Strong margins helped to drive earnings per share of $1.78, which exceeded estimates of $1.72.

Standex anticipates market conditions to improve by year-end and remains confident in achieving long-term financial targets by FY28, including a high-single-digit compounded annual growth rate for revenue, an adjusted operating margin above 19%, and a return on invested capital of above 15%.

Throughout the last three years, Standex has shown robust annual EPS growth of 52% compound, and the revenue is projected to grow at 6.2% per annum on average over the next two years, outperforming the projected 3.2% growth for the US machinery industry.

What is the Outlook for SXI in 2024?

Standex trades at the high end of the 52-week range of $111.02 – $173.54, with bullish technical indicators – above the 20-day moving average price of $156.17 and a 50-day moving average price of $151.43. While it is currently trading below industry and historical averages on a PE (14.89x) and EV to EBITDA (10.50x), it may represent a value at this level.

In a recent research note, Benchmark analyst Michael Legg reiterated a Buy rating with a price target of $190. saying, “We continue to believe SXI’s 2028 targets are intact.” The analyst expects the company to continue to make strategic deals, including the possibility of a significant acquisition in the upcoming quarters.

SXI is rated a Strong Buy based on three bullish reviews from three Wall Street analysts. The average price target is $176.67, representing a 2.12% upside from current levels.

Standex in Summary

Standex has displayed a strong pattern of growth, successfully expanding through strategic acquisitions and consistently achieving high operational margins. Given the company’s demonstrated capacity for robust annual EPS growth and projected revenue growth that surpasses industry expectations, Standex retains a promising outlook.

While the shares are trading at the upper end of their 52-week range, the stock’s current valuation is below the industry average, suggesting there is still room to run. The Strong Buy consensus further fortifies confidence in the company’s potential for promising performance.



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