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XPO, Inc. (NYSE:XPO) shareholders might be concerned after seeing the share price drop 22% in the last quarter. But don't let that distract from the very nice return generated over three years. In fact, the company's share price bested the return of its market index in that time, posting a gain of 90%.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
XPO was able to grow its EPS at 80% per year over three years, sending the share price higher. The average annual share price increase of 24% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About The Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between XPO's total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. We note that XPO's TSR, at 221% is higher than its share price return of 90%. 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
While the broader market gained around 11% in the last year, XPO shareholders lost 4.6%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 35% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand XPO better, we need to consider many other factors. Even so, be aware that XPO is showing 1 warning sign in our investment analysis , you should know about...