XPO (XPO): Buy, Sell, or Hold Post Q2 Earnings?

September 25, 2025 at 00:04 AM EDT

XPO Cover Image

XPO has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 17.2% to $130.11 per share while the index has gained 14.9%.

Is there a buying opportunity in XPO, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Do We Think XPO Will Underperform?

We're sitting this one out for now. Here are three reasons there are better opportunities than XPO and a stock we'd rather own.

1. Revenue Spiraling Downwards

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, XPO’s demand was weak and its revenue declined by 6.5% per year. This was below our standards and signals it’s a low quality business.

2. EPS Growth Has Stalled Over the Last Two Years

While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.

XPO’s flat EPS over the last two years was worse than its 2.6% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

3. Free Cash Flow Margin Dropping

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

As you can see below, XPO’s margin dropped by 6 percentage points over the last five years. It may have ticked higher more recently, but shareholders are likely hoping for its margin to at least revert to its historical level. Almost any movement in the wrong direction is undesirable because of its already low cash conversion. If the longer-term trend returns, it could signal it’s becoming a more capital-intensive business. XPO’s free cash flow margin for the trailing 12 months was 2.8%.

XPO Trailing 12-Month Free Cash Flow Margin

Final Judgment

XPO doesn’t pass our quality test. That said, the stock currently trades at 32× forward P/E (or $130.11 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better opportunities elsewhere. We’d recommend looking at a safe-and-steady industrials business benefiting from an upgrade cycle.

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