$4.28
$53.68
bear $4.28
base $22.91
bull $53.68
margin of safety $12.00
market price* $47.18
GXO Logistics runs warehouses for other companies: it receives, stores, picks, packs and ships goods, and handles returns, for retailers, e-commerce, consumer products, technology and industrial customers. It was spun out of XPO in August 2021 and has since bought Clipper Logistics (2022), PFSweb (2023) and Wincanton (April 2024). Revenue was $13.2 billion in 2025, about 48% from the United Kingdom and 24% from the United States. Most contracts are multi-year; some are cost-plus (the customer pays costs plus a set margin) and some are fixed-price, where GXO absorbs labor cost increases it cannot pass on. Customers regularly re-bid work and can bring it back in-house. How we measured earnings. We start from operating cash flow, strip out swings in working capital, charge stock compensation as a real cost, and deduct the capital spending needed to keep the existing business running (spending tied to organic growth is excluded, but revenue added by acquisitions or currency is not treated as growth). On that basis owner earnings were about $176M (2019), $55M (2020, COVID), $230M (2021), $179M (2022), $312M (2023), $168M (2024) and $190M (2025), or $1.40 to $2.61 per share in the standalone years. Because GXO borrowed about $1.1 billion to acquire Wincanton, we value the business before interest and subtract the debt afterward. Adding back cash interest, the business generated $213M to $369M a year from 2021 to 2025 ($265M in 2024 and $318M in 2025, the two years that include Wincanton). One further judgement: GXO acquires a growing share of its equipment through finance leases (about $29M, $45M and $50M of lease principal repaid in 2023 to 2025, and the lease balance rose from $326M to $475M in the first half of 2026). That is capital spending in another form, so we deduct about $50M a year from cash flow and leave the lease balance out of debt. Our starting level is about $240M a year of cash flow before interest. Wincanton, Clipper and PFSweb brought about $120M a year of amortization of customer relationships, which is not a cash cost; we treat those relationships as wearing out by keeping growth modest and ending it after year 10, not by cutting the starting level. Debt. At June 30, 2026 GXO had about $2.73 billion of borrowings (excluding finance leases) and $769M of cash, of which we treat about $300M as needed to run a business with a large weekly payroll. The 1.65% notes of $400M were due July 2026; remaining maturities are a term loan due May 2027 ($275M), 6.25% notes due 2029 ($600M), 3.75% euro notes due 2030 (500M euros), 2.65% notes due 2031 ($400M) and 6.5% notes due 2034 ($500M). The 2030 and 2031 notes are cheap compared with 6%, which is worth about $83M to shareholders while they last. Net of all this plus a small minority interest, we count about $2.21 billion of net debt. Cash interest paid was $128M in 2025. Base case (about $22.90 per share). Cash flow before interest starts at $240M and grows 2.5% a year for ten years, then stays flat in dollars. That growth is below what GXO has managed without acquisitions: excluding acquired revenue and currency, revenue grew about $325M to $485M a year from 2022 to 2025 (roughly 3.5% to 5%), helped by cost-plus pricing that passes inflation through. Owner earnings rose 13% in 2025, mostly because Wincanton was owned for the full year, so our 2.5% first-year growth is well below the last year's actual rate. We give no credit for new outsourcing wins beyond that record, for margin gains, or for Wincanton cost savings that have not yet shown up. The business is worth about $4.86 billion, owes about $2.21 billion, leaving about $2.65 billion, or $22.90 per diluted share on 115.8 million shares. Bear case (about $4.30 per share). Cash flow before interest falls back to about $170M, near the weakest standalone year (2022's $213M less equipment leases), and never grows: fixed-price contracts absorb wage increases, customers re-bid or take work in-house, and costs like the 2025 Italian VAT charge ($65M) and the 2024 customer litigation settlement ($59M) keep recurring. In this case the cheap 2030 and 2031 notes are refinanced near 6.5%, adding about $125M to the debt burden. The business is worth about $2.83 billion against about $2.34 billion owed, leaving about $0.5 billion, or $4.30 per share. Interest of roughly $140M would still be covered, but only just, which is why so little is left for shareholders. Bull case (about $53.70 per share). Cash flow before interest starts near $280M, close to 2025's $318M less equipment leases, as the Wincanton integration (approved by the UK competition authority in June 2025 and under way since the fall) runs as planned; first-half 2026 operating cash flow of $107M versus $32M a year earlier supports that starting point. Growth runs at 4% a year for ten years, in line with the organic record, then 2% a year as cost-plus contracts pass through inflation. The business is worth about $8.43 billion against $2.21 billion owed, leaving about $6.2 billion, or $53.70 per share. What could make this wrong. Earnings are thin compared with revenue (about 2 cents of cash per dollar of sales), so small changes in labor costs, contract losses or pricing swing value a lot, and debt magnifies that. GXO still has to divest a small group of Wincanton grocery contracts required by the UK competition authority. On the upside, 2023 showed the business can produce over $360M before interest. The margin-of-safety price of $12 reflects the wide gap between the bear and base cases and the leverage.