BGC Group (BGC) is drawing more attention after revenue and earnings expanded at an annual rate of 20.2% over the last two years, suggesting effective execution and a growing presence in its brokerage and fintech niches.
See our latest analysis for BGC Group.
BGC Group’s recent share price performance has been broadly positive, with the latest close at $9.57 and a 90 day share price return of 7.41%, while the 5 year total shareholder return of 122.90% points to a much stronger longer term record.
If BGC’s momentum has you thinking about what else could be on your radar, this might be a good moment to broaden your search with 19 top founder-led companies.
With revenue running at US$2.82b and a recent price of US$9.57, the key question now is whether BGC Group’s strong execution is still underappreciated or if the market is already pricing in future growth.
Preferred P/E of 30.5x: Is it justified?
BGC Group trades on a P/E of 30.5x, while the last close was $9.57, and its earnings based valuation screens as expensive against peers and the wider industry.
The P/E ratio compares the share price to earnings per share and is a common way investors think about how much they are paying for current profits. For BGC, the signals here are mixed, because the company has grown earnings by 22.6% over the past year and 17.2% per year over the past 5 years, yet that growth is being valued at a higher level than many similar capital markets names.
On one side, BGC’s recent earnings growth has been faster than the US Capital Markets industry, which grew earnings by 15.8% over the past year. In addition, revenue is forecast to grow by 12.59% per year, slightly ahead of the broader US market forecast of 10.4% per year. On the other side, the 30.5x P/E is well above its peer average of 7.3x and also above the US Capital Markets industry average of 22.5x. This suggests the market is already assigning a premium to BGC relative to both its close competitors and the sector overall.
See what the numbers say about this price — find out in our valuation breakdown.
Result: Price-to-Earnings of 30.5x (OVERVALUED)
However, you also need to weigh the premium 30.5x P/E in relation to sector cyclicality and any future changes in trading volumes or regulation that could affect profitability.
Find out about the key risks to this BGC Group narrative.
Another View: DCF Points To A Very Different Price
If you step away from the 30.5x P/E and look at our DCF model, the picture flips. On this approach, BGC Group at $9.57 is trading above an estimated future cash flow value of $2.85, which appears overvalued and highlights potential downside risk.
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out BGC Group for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 48 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
All of this leaves a mixed picture, so it makes sense to check the numbers yourself and decide where you stand on BGC Group. To help frame that view, you can weigh up the company's mix of risks and potential upsides by reviewing the 2 key rewards and 2 important warning signs.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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