Assessing QXO’s Valuation as Brad Jacobs Refocuses on Scaling the Business

QXO (QXO) is back in the spotlight after Brad Jacobs said he will step down from his chairman roles at XPO and GXO to focus fully on scaling QXO into a major building products distributor.

See our latest analysis for QXO.

Despite a modest 1 day share price dip and recent choppiness in roofing demand, QXO’s 1 month share price return of 21.91 percent and 1 year total shareholder return of 25.65 percent suggest momentum is building as investors buy into Jacobs strategic pivot.

If this kind of roll up story has your attention, it could be worth scanning fast growing stocks with high insider ownership to uncover other fast growing names benefiting from strong management conviction and ownership.

With analysts seeing more than 50 percent upside to current levels, but the stock already up sharply this year, the key question now is whether QXO is still mispriced or if the market is already discounting years of growth.

Price-to-Sales of 3.1x: Is it justified?

On a Price-to-Sales ratio of 3.1x at a last close of $21.31, QXO screens richer than its trade distributor peers, even after a strong recent rally.

The Price-to-Sales multiple compares a company’s market value to its revenue, a useful lens for high growth or currently unprofitable distributors like QXO. For a business still posting losses, investors are effectively paying today for the scale of future sales and margin expansion the company is expected to deliver.

Relative to the US Trade Distributors industry average of 1.2x and a peer average of 2.9x, QXO’s 3.1x clearly prices in superior growth and execution. Yet our fair Price-to-Sales estimate of 5.4x implies the market could still move materially higher if QXO’s aggressive revenue ramp and eventual path to profitability play out as forecast.

Explore the SWS fair ratio for QXO

Result: Price-to-Sales of 3.1x (UNDERVALUED)

However, QXO’s still negative earnings and dependence on continued construction demand mean that any slowdown or integration missteps could quickly undermine today’s optimistic pricing.

Find out about the key risks to this QXO narrative.

Another View: Our DCF Signals Deeper Upside

While the Price to Sales of 3.1x looks punchy against distributors, our DCF model paints a different picture, suggesting fair value around $43.08 versus today’s $21.31. That 50 percent gap still points to meaningful undervaluation, but can QXO execute fast enough to close it?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out QXO for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 909 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own QXO Narrative

If you see the story differently or want to dive into the numbers yourself, you can build a personalized view in just minutes with Do it your way.

A great starting point for your QXO research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

Looking for more investment ideas?

Do not stop with QXO. Your next standout opportunity could be waiting in the Simply Wall Street Screener, and you may want to consider it before markets move.

• Explore early-stage potential by reviewing these 3612 penny stocks with strong financials that combine small market capitalizations with solid financial characteristics.
• Consider powerful secular trends by targeting these 30 healthcare AI stocks that integrate medical innovation with advanced algorithms to reshape diagnostics, treatment, and patient outcomes.
• Look for resilient income streams by focusing on these 13 dividend stocks with yields > 3% that offer income potential and the financial strength to keep paying through different economic conditions.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com