$500 might not seem like much, but investing it in the right stock over a long period of time can turn even $500 into a substantial sum of money.

XPO (XPO -0.68%), for example, jumped 1,460% in the 2010s, meaning it would have turned $500 into more than $7,000 in 10 years. The company has evolved significantly since then, spinning off the GXO Logistics contract logistics business and the RXO truck brokerage businesses, but XPO's recent earnings report showed why the stock continues to look like a no-brainer buy right now.

In a difficult logistics environment, XPO delivered strong results in the first quarter, posting 5.8% revenue growth to $2.02 billion, and 9% revenue growth in its core North American LTL (less-than-truckload) segment. The overall revenue number edged out expectations of $2.01 billion, but what was really impressive about the quarter was the company's bottom-line improvement.

Adjusted operating ratio -- which is the inverse of operating margin -- in North American LTL improved from 89.6% to 85.7%, or 390 basis points, which drove adjusted operating income up 50% to $175 million and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).

On the bottom line, overall adjusted earnings per share increased from $0.56 to $0.81, easily beating the analyst consensus of $0.67.

The strong results came during a quarter when publicly traded peers like Old Dominion Freight Lines and Saia both fell on their respective earnings releases, showing that XPO is outperforming its competitors and executing on its strategic goals. Let's take a look at how the company beat expectations and why the stock could deliver further gains ahead.

An XPO truck on the road.

Image source: XPO.

Customer service is improving

A key initiative in XPO's LTL 2.0 initiative is improving customer satisfaction, and one major component of that is lowering its damage claims ratio. Damage claims fell to a record low of 0.3% in the quarter from 1.1% in the quarter two years before, showing a dramatic improvement. On-time performance also improved on a year-over-year basis for the eighth consecutive quarter.

Those improvements helped the company achieve yield, or pricing, growth of 9.8% in the quarter, along with 2.6% tonnage growth. In an interview with The Motley Fool, Chief Strategy Officer Ali Faghri said, "We've driven pretty meaningful improvements on the service side as well, which is translating into our customers giving us more business and that's allowing us to earn a higher price."

More room for margin improvement

As part of its LTL 2.0 strategy, XPO set a goal of improving its operating ratio by at least 600 basis points to around 81%, and the recent results show the company is well on its way to that goal. In fact, Faghri said the goal is to drive the operating ratio down into the 70s over time, and the company has a number of levers it can pull to get there.

CEO Mario Harik noted on the earnings call that XPO continues to reduce its dependence on third-party linehaul truckers, as the percentage of outsourced linehaul miles fell 370 basis points to 18%. It also reduced its purchased transportation cost by 21% year over year in the first quarter. XPO can make better profit margins on in-sourced linehaul, but outsourcing gives it more flexibility.

The company is also gaining leverage on its labor as it grows, and Harik noted the company's strategic advantage as the only U.S. freight transportation company that manufactures its own trailers, enabling it to scale up capacity as needed at a lower cost than competitors. It manufactured 1,300 trailers in the first quarter.

Why XPO can keep gaining

XPO spun off GXO and RXO to focus on LTL, which is a business that can deliver wide margins and enables competitive advantages when done well. For example, Old Dominion, which is generally considered the "best-in-breed" in the industry, generates operating margins of around 30%, and XPO is making significant progress in improving its operating ratios. Wall Street also seems to be underestimating XPO; it's beaten earnings estimates by a wide margin in each of its last four quarterly earnings reports.

Faghri said that reinvesting in the business is the company's top priority, as it's historically delivered a return on capital of above 30%. That should help create a flywheel effect as the company grows and its profit margins expand, giving it greater resources to invest in the growth of the business, which drives further growth.

XPO's strong first-quarter results came in a generally soft freight environment. If the industrial economy starts to roar again, this transportation stock could really soar.