Standex International (NYSE:SXI) shares continue to languish, down roughly 8% over the past three months. Although revenues have fallen short of expectations in recent quarters, Standex remains hopeful that a turnaround is in sight. The company’s earnings growth, marked by impressive margins, underscores its strong financial position.
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Standex expects heightened revenue potential due to greater market demand and the accretive impact of a recent acquisition. With an active mergers and acquisitions (M&A) pipeline and a return to average trends anticipated in FY25, SXI stock presents an intriguing option with upside potential in the Industrial Goods sector.
Standex’s Growth Strategy
Standex International is a multinational mini-conglomerate that takes part in an array of different industries across several global markets. It operates primarily through five divisions: Electronics, Engraving, Scientific, Engineering Technologies, and Specialty Solutions.
The company has consistently grown through M&A, completing seven acquisitions over the past eight years, including its most recent acquisition – Sanyu Switch Co., a Japan-based electronic connectors manufacturer. Standex anticipates these acquisitions will positively influence earnings and deliver a double-digit return on invested capital in the first year of ownership.
Standex’s Recent Financial Results and Outlook
Standex recently reported results for Q3 Fiscal 2024 (ended March 31, 2024). Revenue of $177.27 million fell slightly short of analysts’ expectations of $180.14 million. The top line declined 5.7% year-over-year on an organic basis due to challenges in various markets, including persistent sluggishness in the appliances and general industrial sectors in China and Europe.
Notwithstanding the headwinds, the company generated a record fiscal third-quarter free operating cash flow of $19.3 million, constituting 121% of GAAP net income. Earnings per share (EPS) of $1.75 surpassed analyst estimates of $1.71. In addition, the company declared a quarterly dividend of $0.30 per share, which aligns with the previous dividend.
Management forecasts a slightly to moderately higher revenue as the company enters Fiscal 2025. This positive outlook is primarily based on crucial customer inputs, recent order trends, and the expected impact of Standex’s recent acquisition of Sanyu.
What Is the Price Target for SXI Stock?
Analysts following Standex have been bullish on the stock. For instance, Benchmark analyst Michael Legg recently raised the price target from $190 to $210 while keeping a Buy rating on the shares. He stated that the current uptick in sensor orders has “previously served as a leading indicator.” The analyst expects the company’s active M&A pipeline to fuel inorganic growth in FY25.
Overall, Standex International is rated a Strong Buy based on three Buy recommendations over the past three months. The average price target for SXI stock is $197.67, representing an upside of 20.05% from current levels.
Despite the recent downturn in SXI stock, the longer-term trend has been upward, with the stock climbing over 70% in the past three years. Shares trade in the middle of their 52-week price range of $129.56-$183.86 and continue to show negative price momentum, trading below the 20-day (169.21) and 50-day (170.18) moving averages. The stock appears relatively richly valued with a P/S ratio of 2.7x compared to the Specialty Industrial Machinery average of 2.0x.
SXI in Summary
In spite of recent setbacks in the stock, Standex offers potentially promising prospects for investors due to anticipated market trends and strategic acquisitions. With a projected return to average financial trends by FY25, the stock presents an intriguing investment opportunity with the potential for significant upside from current levels.
