This Elite Stock to Buy Is Being Overlooked—For Now

Idex is an overlooked stock to buy and hold for the long term. The wide-moat company owns a variety of businesses that produce highly engineered products for niche markets in the industrial, fire and safety, life science, and water industries. These businesses typically hold a number-one or -two market share position. Idex generates enviable returns on invested capital and has effectively used M&A to enhance organic growth. The stock is a steal today, trading 20% below our $210 fair value estimate. Idex is among our analysts’ 33 Undervalued Stocks to Buy in Q4 2025; it’s also one of Morningstar Chief US Market Strategist Dave Sekera’s 4 New Stocks to Buy Now and Hold for the Long Term.

Idex manufactures a wide array of products, from equipment used in DNA sequencing to wastewater pumps to Jaws of Life hydraulic rescue tools. Its manufacturing prowess allows it to effectively operate in a high-mix/low-volume environment, offering customers a wide variety of configurable or customizable products. Its businesses specialize in making mission-critical equipment that performs a vital function but typically constitutes a small part of the customer’s total bill of materials. This allows Idex to command premium pricing. Historically, management has avoided overpaying for acquisitions. As such, despite regular M&A, Idex has consistently generated returns on invested capital in the upper midteens. We have confidence that management will continue to manage acquisition risk appropriately and focus on maximizing ROICs.

Key Morningstar Metrics for Idex

• Fair Value Estimate: $210
• Star Rating: 4 Stars
• Economic Moat Rating: Wide
• Uncertainty Rating: Medium

Economic Moat Rating

We believe that Idex has a wide economic moat based on customer switching costs and intangible assets. The company has a large installed base of equipment that often performs mission-critical functions where the cost of failure is high. Idex’s long-standing reputation for quality and record of safety allow it to retain customer loyalty in specialized and difficult applications where the margin for error is small. Considering that Idex’s equipment often accounts for a fraction of a customer’s bill of materials, we believe that customers are loath to switch to cheaper but less-proven alternatives, as the potential cost of failure could far outweigh potential cost savings. Idex’s intangible assets include its strong brands, patent portfolio, and reputation for quality and reliability. Investments in innovation have allowed the company to capture incremental market share gains through introductions of new and improved products, as well as entry into adjacent markets.

Read more about Idex’s moat rating.

Fair Value Estimate for Idex Stock

Our fair value estimate is $210 per share. We model a roughly 5.5% organic revenue compound annual growth rate during our five-year explicit forecast period. In the long run, we expect Idex’s organic revenue growth to outpace the industrial production growth rate by approximately 1%-2%, driven by ongoing investments in research and development as well as M&A. In our model, meaningful acquisitions help the company reach a roughly 9% total growth rate from 2024 through 2029. We project adjusted EBITDA margins averaging around 28% over the next five years, roughly 50 basis points above the prior five-year average, as we expect the company to benefit from higher volume that drives increased profitability in the long run. We model a roughly 28.5% adjusted EBITDA margin for our midcycle assumption. We assume an 8.6% weighted average cost of capital and a 22% long-run effective tax rate.

Read more about Idex’s fair value estimate.

Risk and Uncertainty

Like many other diversified industrials we cover, Idex is exposed to global macroeconomic conditions, including a potential slowdown in industrial production, as well as cyclicality in its end markets. This cyclicality is partially mitigated by the company’s large installed base, which generates a relatively steady stream of recurring revenue from aftermarket parts and servicing. At current tariff rates, management estimates an annualized tariff impact of around $100 million, $80 million of which is related to China, prior to any countermeasures. However, we expect the tariff impact to be offset by incremental price increases, supply chain management, localizing manufacturing, and productivity actions. Another key risk we see is around the execution of the company’s acquisition strategy.

Read more about Idex’s risk and uncertainty.

Idex Bulls Say

• Idex has a portfolio of moaty businesses with leading shares in niche end markets.
• Free cash flows have averaged around 17.5% of sales during the past 10 years.
• The acquisitions of Akron Brass and AWG, as well as new product introductions, have reinforced Idex’s already strong competitive position in the fire and safety business.

Idex Bears Say

• If industrial production remains sluggish, organic revenue growth may decelerate.
• Idex relies on acquisitions to supplement its organic growth, and poor execution of its M&A strategy could destroy shareholder value.
• Cost inflation, tariffs, and persistent strength in the US dollar could have an adverse impact on profitability.

This article was compiled by Susan Dziubinski and Sylvia Hauser. Data as of Oct. 7, 2025, unless otherwise noted.