Investors Still Waiting For A Pull Back In XPO, Inc. (NYSE:XPO)

There wouldn't be many who think XPO, Inc.'s (NYSE:XPO) price-to-sales (or "P/S") ratio of 1.4x is worth a mention when the median P/S for the Transportation industry in the United States is similar at about 0.9x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for XPO

What Does XPO's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, XPO has been doing relatively well. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on XPO will help you uncover what's on the horizon.

How Is XPO's Revenue Growth Trending?

XPO's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 110%. However, this wasn't enough as the latest three year period has seen the company endure a nasty 33% drop in revenue in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next three years should generate growth of 7.6% per year as estimated by the analysts watching the company. That's shaping up to be similar to the 9.5% per year growth forecast for the broader industry.

In light of this, it's understandable that XPO's P/S sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

What We Can Learn From XPO's P/S?

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

A XPO's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Transportation industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

You always need to take note of risks, for example - XPO has 3 warning signs we think you should be aware of.

If these risks are making you reconsider your opinion on XPO, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.