XPO Logistics (XPO -0.68%) was one of the top 10 best-performing stocks among publicly traded companies in the Fortune 500 in the last decade. Over that time, the conglomerate logistics company transformed itself. Last year, the company spun off its contract logistics arm, GXO Logistics, which runs nearly 1,000 warehouses around the world. 

After investors greeted that move favorably, XPO spun off the other remaining business segment, the truck brokerage business now known as RXO (RXO 0.95%). RXO shares fell in their first week trading on the market. They opened at roughly $20 a share on the first morning of trading and declined about 20% over the course of the week.

However, despite the inauspicious beginnings, RXO has the potential to be a market-beater over the coming years. Here's what you need to know about XPO's latest spinoff to hit the market.

Get to know RXO

RXO is the fourth-largest truck brokerage in the U.S. with an estimated 4% market share, showing just how much the industry is fragmented.  

RXO differentiated itself from the competition through technology, and the best example of that may be the RXO Connect mobile app, which connects shippers with carriers much like Uber Technologies connects drivers with riders. RXO has been downloaded by more than 800,000 drivers and helped modernize an industry where brokerages traditionally worked the phones to match carriers and shippers.

RXO Connect uses dynamic pricing and machine learning to optimize pricing and boost efficiency, helping the company expand margins. Its customer base is also a source of strength -- it counts 58% of the Fortune 100 as customers, including Costco, Ford Motor Company, Tractor Supply, Lowe's, and Dow. Its top 10 customers have been with it for an average of 16 years, showing a high level of customer loyalty.

The company has a track record of outperforming the industry. It's grown by a compound annual growth rate (CAGR) of 21% since 2019, three times the industry average, and generates $5.1 billion in revenue annually. Adjusted EBITDA, meanwhile, jumped by a CAGR of 40% to $302 million.

Most of the company's carriers are small businesses, and 85% have five or fewer trucks, making them dependent on RXO for business. 

The growth opportunity

RXO is operating in a $750 billion addressable market with secular tailwinds that include the continued outsourcing of transportation services, the growing popularity of digital solutions, and supply shortages of both drivers and trucks. These tailwinds should lift prices in the industry and ensure demand for RXO's services.

Meanwhile, RXO's core services, including truck brokerage, managed transportation, and last mile, are expected to grow by a compound annual rate of at least 10% over the last five years.

Throughout its history, RXO reliably outgrew the industry, tripling the 9% growth rate in truck brokerage from 2013-2021, growing by 27% a year, RXO CEO Drew Wilkerson said in an interview with the Motley Fool. Looking ahead, the company expects to grow EBITDA by a compound annual rate of 11% over the next five years to reach $475 million-$525 million.

RXO has an asset-light model with 87% variable costs so it can ramp spending up and down according to market conditons, and Wilkerson said he's focused on the macro environment so the business can respond to any changes. 

Investors are likely to be more familiar with the XPO side of the business, but they shouldn't overlook RXO, especially as the stock trades at around 6 times trailing EBITDA. That price is for a business with a track record of taking market share with a target of growing EBITDA by 11% over the next five years, amid favorable industry dynamics. 

Though the market seems to be ignoring RXO for now, its low valuation only makes it more likely that this transportation stock can outperform the market over the coming years.