IDEX (IEX)

Manufacturing company IDEX (NYSE:IEX) reported Q4 CY2025 results beating Wall Street’s revenue expectations, with sales up 4.2% year on year to $899.1 million. Its non-GAAP profit of $2.10 per share was 2.9% above analysts’ consensus estimates.

Company Overview

Founded in 1988, IDEX (NYSE:IEX) is a global manufacturer specializing in highly engineered products such as pumps, flow meters, and fluidics systems for various industries.

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 Dover (NYSE:DOV), Xylem (NYSE:XYL), and Parker Hannifin (NYSE:PH).

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, IDEX’s 8% annualized revenue growth over the last five years was decent. Its growth was slightly above the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. IDEX’s recent performance shows its demand has slowed as its annualized revenue growth of 2.8% over the last two years was below its five-year trend.

IDEX also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, IDEX’s organic revenue was flat. Because this number is lower than its two-year revenue growth, we can see that some mixture of acquisitions and foreign exchange rates boosted its headline results.

This quarter, IDEX reported modest year-on-year revenue growth of 4.2% but beat Wall Street’s estimates by 2.2%.

Looking ahead, sell-side analysts expect revenue to grow 2.2% over the next 12 months, similar to its two-year rate. This projection is underwhelming and indicates its newer products and services will not lead to better top-line performance yet.

IDEX has best-in-class unit economics for an industrials company, enabling it to invest in areas such as research and development. Its margin also signals it sells differentiated products, not commodities. As you can see below, it averaged an elite 44.5% gross margin over the last five years. That means IDEX only paid its suppliers $55.45 for every $100 in revenue.

IDEX produced a 43.1% gross profit margin in Q4, in line with the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, 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 a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

IDEX has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 22%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, IDEX’s operating margin decreased by 2.8 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, IDEX generated an operating margin profit margin of 20.4%, up 1.3 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

IDEX’s decent 8.9% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

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

For IDEX, its two-year annual EPS declines of 1.7% mark a reversal from its five-year trend. We hope IDEX can return to earnings growth in the future.

In Q4, IDEX reported adjusted EPS of $2.10, up from $2.04 in the same quarter last year. This print beat analysts’ estimates by 2.9%. Over the next 12 months, Wall Street expects IDEX’s full-year EPS of $7.95 to grow 4.5%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

IDEX has shown terrific cash profitability, putting it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the industrials sector, averaging 17.8% over the last five years.

IDEX’s free cash flow clocked in at $189.8 million in Q4, equivalent to a 21.1% margin. This result was good as its margin was 2.9 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although IDEX hasn’t been the highest-quality company lately, it historically found a few growth initiatives that worked. Its five-year average ROIC was 12.9%, 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, IDEX’s ROIC has decreased 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.

IDEX reported $580 million of cash and $1.82 billion 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 $925.9 million of EBITDA over the last 12 months, we view IDEX’s 1.3× net-debt-to-EBITDA ratio as safe. We also see its $32 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.

We enjoyed seeing IDEX beat analysts’ revenue expectations this quarter. We were also happy its organic revenue narrowly outperformed Wall Street’s estimates. On the other hand, its EPS guidance for next quarter missed and its full-year EPS guidance fell slightly short of Wall Street’s estimates. Overall, this print was mixed but still had some key positives. The stock remained flat at $201.66 immediately after reporting.

Updated: February 4, 2026 at 7:37 AM 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 IDEX.

IDEX falls short of our quality standards. Although its revenue growth was decent over the last five years, it’s expected to deteriorate over the next 12 months and its diminishing returns show management's prior bets haven't worked out. And while the company’s powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits, the downside is its flat organic revenue disappointed.

IDEX’s P/E ratio based on the next 12 months is 24.3x. This valuation tells us a lot of optimism is priced in - we think there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $198.62 on the company (compared to the current share price of $201.66).