What happened

Shares of transportation logistics company XPO Logistics (NYSE:XPO) dropped 23.5% in May, according to data provided by S&P Global Market Intelligence. That more than wiped out the stock's gains for the year. Currently, shares are down about 5.7% for 2019.

So what

The catalyst for XPO's poor performance in May was a dreadful first-quarter 2019 earnings report on May 1, in which the company reported a 2% year-over-year decline in revenue and a gut-wrenching 27% drop in adjusted net earnings compared to Q1 2018. Some of this was expected, thanks to anticipated currency headwinds and the loss of a major customer (unnamed by the company but almost certainly Amazon.com), but it still caused the stock to take a hit.

A truck driving in a lit-up highway tunnel

Image source: Getty Images.

But the share price continued to recede throughout the month, which may be due to a broader shift in XPO's strategy. Over the past several years, XPO has pursued rapid growth through acquisition. CEO Bradley Jacobs -- known as a "roll-up specialist" -- helmed what was a niche trucking specialist with a less-than-$200-million market cap into a $17 billion shipping juggernaut. Between October 2008 and October 2018, the stock appreciated some 2,240%. 

But in the few quarters since, things have changed dramatically at XPO. Jacobs made an about-face and said the company won't be pursuing any more major acquisitions. And indeed, the company has started using its cash -- and some debt -- to finance share repurchases instead. This isn't necessarily a bad strategy, but it isn't what existing investors were expecting. Add to that a bunch of high-profile departures from the C-suite -- XPO is looking for a new CFO and has hired a new COO and chief strategy officer within the last year -- and investors may just be saying, "This isn't what I signed on for," and dumping the stock.

Now what

The question is whether XPO is still a compelling investment despite the strategic shift and recent underperformance. Well, investors looking for high-growth prospects should probably turn their focus elsewhere. And with the stock still trading at 19.5 times earnings -- even after the May slump -- it's hard to make the case that the stock is a value play, either. 

Existing investors, though, should probably consider hanging on to their shares, at least until the new management team has a chance to clarify where the company is headed. XPO may have hit a rough patch right now, but it's been incredibly well managed in the past, and it's probably worth sticking around to see how things play out.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.