XPEL stock surges to $77, but high P/E divides investors

XPEL jumps from $14 to $77 as P/E hits 100

In November 2019, XPEL Inc. (Nasdaq: XPEL) announced record quarterly revenues of $35.6 million, a 21.9% year-over-year increase, with earnings per share doubling to $0.16. The San Antonio-based company, specializing in paint protection films and ceramic coatings, entered the list of small-cap stocks with explosive growth. Two years later, the share price has risen from $14 to $77, and its P/E ratio is now in triple digits. Few dispute the growth; many question the price paid for it.

Results supporting the narrative

XPEL has not missed a single earnings report during this period. Q3 2019 closed with $35.6 million in sales, a gross margin of 34.5% compared to 30.3% a year prior, and $0.16 EPS. Q4 was even stronger in growth rate: revenues rose by 47.4%, though the full year ended at 18.2%. In Q1 2020, amid the pandemic, the company generated $28.4 million (+14.8%), raised gross margins to 36.3%, and recorded a one-time expense of $0.7 million for its annual distributor conference. In Q2 2020, revenues increased by 19.0% and net income by 32.1%.

CEO Ryan Pape summarized the tone in those early presentations: strong continuous growth, better margins, and higher profitability, with a detail favored by small-cap managers — the return to growth in China, up 16.5% in Q3 2019. The margin engine is key: moving from 30.3% to 34.5% gross margin in twelve months is the fastest way to multiply profits without multiplying sales.

How much has XPEL grown since 2019?

The quarterly revenue growth rate is the part of the story no one disputes:

• Q3 2019: +21.9%
• Q4 2019: +47.4%
• Q1 2020: +14.8%
• Q2 2020: +19.0%
• Q3 2021: +48.6%

In Q3 2021, the company reported $68.5 million in revenue and earned $8.3 million, or $0.30 per share, compared to $6.6 million and $0.24 in the same period last year: a 26.1% increase in net income on 48.6% higher sales, with 38.4% organic growth. Key metrics — a 44% ROE and 38% growth — explain why the stock appreciated 150% in a single year and why some openly call it a growth machine.

Why sell XPEL at a 100x P/E?

At these multiples, you are not buying current results, but the certainty that the company will continue growing at rates few sustain for years. Some argue a 100x P/E is excessive and requires impossible growth to justify; the same analysis acknowledges XPEL is a great company and that the market will keep pushing the price during the bull cycle. The opposing view suggests holding, because the cost of exiting and re-entering exceeds the impact of a temporary correction.

Price targets discussed range from $80 to $100, with calculations showing cumulative returns of eleven times the initial investment for early buyers and seven to eight baggers for later entries. The disagreement lies not in the company's numbers, but in how long one is willing to wait and what price buys patience.

Acquisitions, patents, and debated competitive advantage

XPEL built part of its moat through small, surgical acquisitions. In October 2021, it announced the purchase of five businesses in the US and Canada, having recently integrated InvisiFRAME to unify distribution and installation under its umbrella. The company emphasizes its marketing strategy and certified installer network.

The other pillar is the product. Its paint protection film Ultimate Plus expanded in 2021 to include a self-healing glossy black version, and its brand protects supercar fleets — Porsche, Lamborghini, Ferrari — on US circuits. Tesla and Aston Martin are frequently cited as commercial endorsements. The patented DAP software allows custom cutting without disassembling vehicles, marketed as a wide competitive advantage.

Not everyone agrees. Critics note the protective film market is not a monopoly and that 3M competes there with superior industrial and distribution muscle. This is the uncomfortable nuance of any growth thesis: a software patent and strong brand are not, by themselves, insurmountable barriers.

Resistance levels, corrections, and lingering doubts

The stock has seen short-term scares: corrections thought finished, sharp turns, 9% daily gains, and historic highs repeatedly tested. At one point, $17.60 was cited as a breakout level; today, that figure is history.

The analysis always stalls at the same point. XPEL executes, improves margins, buys businesses, and boosts double-digit profit growth. Yet, at a 100x P/E, every quarter must be better than the last to sustain the price. If growth normalizes even slightly, the multiple does not adjust; it breaks.