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XPO Stock Continues to Soar: Investors Showing Strong Support

Key Points
XPO Logistics stock is experiencing significant growth during Friday’s trading session. 
Investors have high confidence in the company’s future potential. 
Despite some minor contractions throughout the year, the market is focused on the prospects of XPO.
5 stocks we prefer over Schneider National
Shares of XPO NYSE: XPO have been skyrocketing since the first quarter of 2023, surpassing all expectations and delivering an impressive 165% increase in less than six months. 
Some market participants speculate that this upward trend has plateaued, but the prevailing trend cannot be ignored.
During Friday’s trading session, XPO Logistics stock rose by up to 8% as investors analyzed the latest second-quarter 2023 earnings release. Traders and other participants are looking for positive developments that could drive further momentum in the stock, while skeptics search for any indications of slowdowns and a subsequent pullback.
Skeptics will face not only the strong upward trend in the stock but also the overall market sentiment, which is highly favorable towards XPO. With the stock rising by nearly double digits and poised to exceed its previous all-time high, it presents a positive outlook for the company despite some cyclical downturns in its financial performance.
Where is the Market Vote?
The initial signals in financial markets, often referred to as the “popularity contest,” can be a useful tool for investors to understand sector preferences. Bias typically leads to higher returns and sustained momentum, so it is worth examining the different returns in the logistics and trucking sectors to establish an initial foundation. 
XPO has outperformed other mid-capitalization competitors (companies with a market capitalization of $2 billion to $10 billion), surpassing names like ArcBest NASDAQ: ARCB and Schneider National NYSE: SNDR. Over the past 12 months, ArcBest achieved a respectable 34.5% return, while Schneider saw a 28.2% increase. These may be satisfactory returns for most investors, but those seeking significant wealth would envy those who invested in XPO. The forward price-to-earnings ratio evaluates the next 12 months of projected earnings rather than the past 12 months, which is the conventional approach.
The market has assigned a higher perceived value and “quality” to each dollar of future earnings expected from XPO. On the other hand, peers like ArcBest and Schneider trade at lower price-to-earnings ratios 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. Over the period from 2021 to 2027, management aims to maintain key performance indicators within a specific range and gauge market confidence through valuation multiples and price performance — solid expectations.
XPO experienced a slight decline in revenue by 6.3%, primarily due to lower fuel surcharge revenue caused by the volatile oil markets. As investors focus on the future, maintaining revenue within management’s projected range of 6% to 8% in the coming years would be advantageous, especially for a company of this size.
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