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XPO’s Stock Price Continues to Soar: Investors Showing Confidence in the Company

Key Points
XPO Logistics stock is seeing significant gains in Friday’s trading session. 
Markets have a strong belief in the company’s future potential. 
Despite some minor contractions throughout the year, markets are focusing on the prospects of XPO.
5 stocks we like better than Schneider National
Shares of XPO NYSE: XPO have been experiencing incredible growth since the first quarter of 2023, surpassing all expectations and delivering a massive 165% increase in less than six months. 
Some market observers speculate that this rally may have reached its peak, but it’s difficult to go against the trend.
During Friday’s trading session, XPO Logistics stock rose by 8% as the latest second-quarter 2023 earnings were released. Traders and other participants are looking for developments that could justify further momentum in the stock, while those with bearish sentiments are searching for signs of a slowdown and subsequent pullback.
Bears not only have to contend with the significant upward trend in the stock, but also the overall market sentiment that is rewarding this stock. As the stock rises by nearly double digits and approaches its all-time high, it presents an optimistic outlook for the company despite some cyclicalfinancial slowdowns.
Where is the Market Vote?
The initial signals in financial markets, often referred to as the “popularity contest,” can be a helpful indicator for investors to gauge sector favoritism. Since bias tends to lead to higher returns and sustained momentum, understanding the different returns in the logistics and trucking sectors can lay a foundation. 
XPO has outperformed other mid-cap competitors (companies with a market capitalization between $2 billion and $10 billion), surpassing names like ArcBest NASDAQ: ARCB and Schneider National NYSE: SNDR. In the past 12 months, ArcBest achieved a return of 34.5%, while Schneider rose by 28.2%. These returns may satisfy most investors, but those aiming to build significant wealth would envy their peers who invested in XPO. The forward price-to-earnings ratio considers the expected earnings for the next 12 months instead of the past year, as the traditional P/E ratio does.
The markets are attributing a higher perceived value and “quality” to each dollar of future earnings projected for XPO compared to its peers. ArcBest and Schneider trade at a lower forward P/E ratio of 12.0x and 13.9x, respectively. Value investors should take this into consideration.
Outlook-Driven Markets
In the company’s second-quarter investor presentation, investors can review management’s value proposition, which explains the rationale behind investing in the company. From 2021 to 2027, management aims to maintain a specific range for key performance indicators and assesses market confidence through valuation multiples and price performance — solid expectations.
XPO experienced a slight decrease in revenue, 6.3%, influenced by lower fuel surcharge revenue, which can be attributed to the volatile nature of the oil markets. As investors focus on the future, maintaining revenue within management’s projected 6% to 8% range in the coming years would be advantageous, particularly for a company of this size.
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