XPO (NYSE:XPO) Investors Are up 7.0% in the Past Week, but Earnings Have Declined Over the Last Year

Simply Wall St ·  Nov 15, 2023 08:36

When you buy shares in a company, there is always a risk that the price drops to zero.  But if you pick the right business to buy shares in, you can make more than you can lose.  For example, the XPO, Inc. (NYSE:XPO) share price has soared 118% in the last 1 year. Most would be very happy with that, especially in just one year!    On top of that, the share price is up 20% in about a quarter.    The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. Unfortunately the longer term returns are not so good, with the stock falling 18% in the last three years.    

Since the stock has added US$661m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.  

View our latest analysis for XPO

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance.  One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over the last twelve months, XPO actually shrank its EPS by 18%.

Given the share price gain, we doubt the market is measuring progress with EPS.  Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.

We think that the revenue growth of 110% could have some investors interested.  We do see some companies suppress earnings in order to accelerate revenue growth.    

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

NYSE:XPO Earnings and Revenue Growth November 15th 2023

It's good to see that there was some significant insider buying in the last three months. That's a positive.  That said, we think earnings and revenue growth trends are even more important factors to consider.   So it makes a lot of sense to check out what analysts think XPO will earn in the future (free profit forecasts).

A Different Perspective

We're pleased to report that XPO shareholders have received a total shareholder return of 118% over one year.    That gain is better than the annual TSR over five years, which is 29%. Therefore it seems like sentiment around the company has been positive lately.  Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity.        While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important.   For example, we've discovered 3 warning signs for XPO that you should be aware of before investing here.  

XPO is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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