DXP Enterprises

None of the warning signs we check for were found.

We look for five warning signs: doubt it can keep going, weak checks on its own accounts, a notice that its past accounts can't be relied on, a change of auditor, and one customer bringing in a big share of sales. We don't check lawsuits, investigations or debt yet.

We checked the auditor's report, internal controls, restatement notices, auditor changes and big customers in the 10-K filed 26 Feb 2026, plus the 10-Q filed 6 Aug 2026 and 4 later 8-Ks.

Cheap for a reason is the question the numbers cannot answer.

Whether the price already reflects the risks is what the deep dive is for.

• Our uncertain tax position and effective tax rate may vary from period to period.

  Could happen

  The Company's uncertain tax position and effective tax rate may vary from period to period. Currently, these uncertainties primarily relate to an ongoing Internal Revenue Service (“IRS”) examination regarding the realization of federal research and development tax credits.

• Material changes in the costs of our products from manufacturers without the ability to pass price increases onto our customers could cause our gross and operating margins to decline.

  Additionally, market variables, such as inflation of product costs, labor rates, fuel, freight and energy costs, as well as geopolitical events, could negatively impact our ability to effectively manage our operating and administrative expenses. For example, geopolitical conflicts and related international responses have and may continue to exacerbate inflationary pressures, including increases in fuel and other energy costs. Additionally, climate-related policies, carbon pricing mechanisms, and regulations aimed at reducing emissions may increase energy and raw material costs, which could put additional pressure on our margins. Inflation may also reduce demand for products, resulting in lower sales volumes. In addition, our inability to pass on increases in costs to customers in a timely manner, or at all, could cause operating and administrative expenses to grow more rapidly than sales, which could result in lower gross margins and net earnings.

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• Our uncertain tax position and effective tax rate may vary from period to period.

  Could happen

  We believe we have established an adequate reserve for any adjustments resulting from tax examinations. However, the outcome of these examinations cannot be predicted with certainty. If issues addressed in our tax examinations are resolved differently than management expects, given current facts and circumstances, we may need to adjust our income tax reserves and effective tax rate accordingly. Although the timing of resolution, settlement, and closure of examinations remains uncertain, we do not believe it is reasonably possible that our unrecognized tax benefits from certain U.S. federal, state, and non-U.S. tax positions will materially change in the next 12 months.

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• Our uncertain tax position and effective tax rate may vary from period to period.

  As of December 31, 2025, the Company recognized a total of $29.8 million in federal income tax credits for research activities from 2015 through 2025, of which $3.8 million is from an ongoing IRS audit of the 2018 tax year. In addition, the Company has also recorded a $5.1 million reserve for uncertain tax positions related to these credits, of which $993,000 is related to the ongoing IRS audit noted above.

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• Our uncertain tax position and effective tax rate may vary from period to period.

  Could happen

  In addition to the position noted above, we regularly evaluate the likelihood of adverse outcomes from these examinations to assess whether our income tax reserves are sufficient. We continue to track the progress of ongoing discussions with tax authorities and the potential impact of the expected expiration of the statute of limitations in various taxing jurisdictions.

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