What a time it’s been for Standex. In the past six months alone, the company’s stock price has increased by a massive 46.4%, reaching $242.02 per share. This performance 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?

We’re happy investors have made money, but we're swiping left on Standex for now. Here are three reasons there are better opportunities than SXI and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Standex’s sales grew at a mediocre 6.9% compounded annual growth rate over the last five years. This fell short of our benchmark for the industrials sector.

2. 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 4.4 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 4.9%.

3. New Investments Fail to Bear Fruit as ROIC Declines

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

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. On average, Standex’s ROIC decreased by 1.2 percentage points annually 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.

Final Judgment

Standex’s business quality ultimately falls short of our standards. After the recent surge, the stock trades at 28.3× forward P/E (or $242.02 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're fairly confident there are better investments elsewhere. Let us point you toward one of our top digital advertising picks.

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