Standex (SXI)

Industrial manufacturer Standex (NYSE:SXI) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 27.6% year on year to $217.4 million. Its non-GAAP profit of $1.99 per share was 4.4% above analysts’ consensus estimates.

Company Overview

Holding over 500 patents globally, Standex (NYSE:SXI) is a manufacturer and distributor of industrial components for various sectors.

Gas and liquid handling companies possess the technical know-how and specialized equipment to handle valuable (and sometimes dangerous) substances. Lately, water conservation and carbon capture–which requires hydrogen and other gasses as well as specialized infrastructure–have been trending up, creating new demand for products such as filters, pumps, and valves. On the other hand, gas and liquid handling companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.

Competitors offering similar products include Illinois Tool Works (NYSE:ITW), Dover (NYSE:DOV), and Middleby (NASDAQ:MIDD).

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Standex’s sales grew at a mediocre 6.9% compounded annual growth rate over the last five years. This was below our standard for the industrials sector and is a tough starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Standex’s annualized revenue growth of 6% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.

This quarter, Standex reported robust year-on-year revenue growth of 27.6%, and its $217.4 million of revenue topped Wall Street estimates by 0.7%.

Looking ahead, sell-side analysts expect revenue to grow 9% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and indicates its newer products and services will spur better top-line performance.

For industrials businesses, cost of sales is usually comprised of the direct labor, raw materials, and supplies needed to offer a product or service. These costs can be impacted by inflation and supply chain dynamics in the short term and a company’s purchasing power and scale over the long term.

Standex’s unit economics are great compared to the broader industrials sector and signal that it enjoys product differentiation through quality or brand. As you can see below, it averaged an excellent 38.6% gross margin over the last five years. Said differently, roughly $38.55 was left to spend on selling, marketing, R&D, and general administrative overhead for every $100 in revenue.

Standex produced a 41.6% gross profit margin in Q3, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Standex has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 14.5%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Standex’s operating margin rose by 2.3 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q3, Standex generated an operating margin profit margin of 13.6%, down 2.2 percentage points year on year. Since Standex’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Standex’s EPS grew at an astounding 17.7% compounded annual growth rate over the last five years, higher than its 6.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Standex’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Standex’s operating margin declined this quarter but expanded by 2.3 percentage points over the last five years. Its share count also shrank by 1.9%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Standex, its two-year annual EPS growth of 8.6% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q3, Standex reported adjusted EPS of $1.99, up from $1.71 in the same quarter last year. This print beat analysts’ estimates by 4.4%. Over the next 12 months, Wall Street expects Standex’s full-year EPS of $8.13 to grow 7.6%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Standex has shown impressive cash profitability, enabling it to ride out cyclical downturns more easily while maintaining its investments in new and existing offerings. The company’s free cash flow margin averaged 8.1% over the last five years, better than the broader industrials sector.

Taking a step back, we can see that Standex’s margin dropped by 4.4 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

Standex’s free cash flow clocked in at $10.39 million in Q3, equivalent to a 4.8% margin. The company’s cash profitability regressed as it was 1.6 percentage points lower than in the same quarter last year, suggesting its historical struggles have dragged on.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Standex hasn’t been the highest-quality company lately, it historically found a few growth initiatives that worked. Its five-year average ROIC was 12.8%, higher than most industrials businesses.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Standex’s ROIC averaged 1.5 percentage point decreases over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Standex reported $98.65 million of cash and $544.6 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $183.6 million of EBITDA over the last 12 months, we view Standex’s 2.4× net-debt-to-EBITDA ratio as safe. We also see its $14.04 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Standex narrowly top analysts’ revenue and EPS expectations this quarter. On the other hand, its EBITDA missed. Zooming out, we think this was a mixed quarter. The stock remained flat at $240 immediately following the results.

Updated: December 3, 2025 at 10:32 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Standex.

Standex doesn’t top our investment wishlist, but we understand that it’s not a bad business. Although its revenue growth was mediocre over the last five years, its growth over the next 12 months is expected to be higher. And while Standex’s cash profitability fell over the last five years, its astounding EPS growth over the last five years shows its profits are trickling down to shareholders.

Standex’s P/E ratio based on the next 12 months is 26.8x. While this valuation is fair, the upside isn’t great compared to the potential downside. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $260.40 on the company (compared to the current share price of $240.84).