Here's Why We Think XPO (NYSE:XPO) Might Deserve Your Attention Today

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10 hours ago

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like XPO (NYSE:XPO). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.
XPO has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. XPO's EPS skyrocketed from US$2.09 to US$3.30, in just one year; a result that's bound to bring a smile to shareholders. That's a commendable gain of 58%.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. XPO reported flat revenue and EBIT margins over the last year. That's not bad, but it doesn't point to ongoing future growth, either.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
See our latest analysis for XPO
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for XPO's future EPS 100% free.
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
With strong conviction, XPO insiders have stood united by refusing to sell shares over the last year. But the real excitement comes from the US$200k that Chief Operating Officer David Bates spent buying shares (at an average price of about US$106). It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.
The good news, alongside the insider buying, for XPO bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$282m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.
For growth investors, XPO's raw rate of earnings growth is a beacon in the night. Moreover, the management and board of the company hold a significant stake in the company, with one party adding to this total. Astute investors will want to keep this stock on watch. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for XPO that you should be aware of.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of XPO, you'll probably love this curated collection of companies in the US that have an attractive valuation alongside insider buying in the last three months.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.