XPO's (NYSE:XPO five-year decrease in earnings delivers investors with a 9.9% loss

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in XPO, Inc. (NYSE:XPO), since the last five years saw the share price fall 69%. We also note that the stock has performed poorly over the last year, with the share price down 58%. More recently, the share price has dropped a further 9.5% in a month. But this could be related to poor market conditions -- stocks are down 3.8% in the same time.

If the past week is anything to go by, investor sentiment for XPO isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Check out our latest analysis for XPO

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Looking back five years, both XPO's share price and EPS declined; the latter at a rate of 10% per year. This reduction in EPS is less than the 21% annual reduction in the share price. This implies that the market is more cautious about the business these days.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that XPO has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between XPO's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. We note that XPO's TSR, at -9.9% is higher than its share price return of -69%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

While the broader market lost about 12% in the twelve months, XPO shareholders did even worse, losing 30%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.9% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 2 warning signs we've spotted with XPO .

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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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.