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Buying shares in the best businesses can build meaningful wealth for you and your family. While not every stock performs well, when investors win, they can win big. For example, the XPO Logistics, Inc. (NYSE:XPO) share price is up a whopping 475% in the last half decade, a handsome return for long term holders. This just goes to show the value creation that some businesses can achieve. It's also good to see the share price up 21% over the last quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the five years of share price growth, XPO Logistics moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Dive deeper into XPO Logistics' key metrics by checking this interactive graph of XPO Logistics's earnings, revenue and cash flow.
A Different Perspective
It's good to see that XPO Logistics has rewarded shareholders with a total shareholder return of 128% in the last twelve months. That gain is better than the annual TSR over five years, which is 42%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. To that end, you should learn about the 5 warning signs we've spotted with XPO Logistics (including 1 which is a bit unpleasant) .
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
This article by Simply Wall St is general in nature. 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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