Yahoo Finance While shareholders of XPO Logistics (NYSE:XPO) are in the red over the last year, underlying earnings have actually grown
It's easy to match the overall market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by XPO Logistics, Inc. (NYSE:XPO) shareholders over the last year, as the share price declined 67%. That's disappointing when you consider the market declined 17%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 13% in three years. Furthermore, it's down 35% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 15% in the same timeframe.
The recent uptick of 8.5% could be a positive sign of things to come, so let's take a lot at historical fundamentals.
Check out our latest analysis for XPO Logistics
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
XPO Logistics stole the show with its EPS rocketing, in the last year. While the business is unlikely to sustain such a high growth rate for long, it's great to see. As you can imagine, the share price action therefore perturbs us. So it's worth taking a look at some other metrics.
XPO Logistics' revenue is actually up 43% over the last year. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
XPO Logistics is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
What about the Total Shareholder Return (TSR)?
We've already covered XPO Logistics' share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that XPO Logistics' TSR, at -43% is higher than its share price return of -67%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
We regret to report that XPO Logistics shareholders are down 43% for the year. Unfortunately, that's worse than the broader market decline of 17%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand XPO Logistics better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with XPO Logistics (at least 1 which can't be ignored) , and understanding them should be part of your investment process.
But note: XPO Logistics may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.
