IDEX Looks Like A High-Priced Recovery Play

Up almost 30% over the past year, IDEX (IEX) has not only outperformed comps like Dover (DOV), Xylem (XYL), and Colfax (CFX), but reached pretty heady valuation levels. While IDEX does have a quality collection of businesses that includes pumps, meters, and fluidics, not to mention a lot of specialty market exposure, the company's historical growth, margin, and free cash flow performance don't convince me that it's worth paying such a robust valuation today. Although I like the company's prospects for improving organic growth over the next few years and the opportunity for incremental M&A, not to mention the possibility of a lower tax rate, a mid-teens multiple on EBITDA and an implied total return in the mid-single digits on a DCF basis don't work for me.

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IDEX Looks Like A High-Priced Recovery Play