BGC Group, Inc. (NASDAQ:BGC) Might Not Be As Mispriced As It Looks

With a price-to-sales (or "P/S") ratio of 2.3x BGC Group, Inc. (NASDAQ:BGC) may be sending bullish signals at the moment, given that almost half of all the Capital Markets companies in the United States have P/S ratios greater than 3.3x and even P/S higher than 9x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for BGC Group

How BGC Group Has Been Performing

BGC Group could be doing better as it's been growing revenue less than most other companies lately. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think BGC Group's future stacks up against the industry? In that case, our free report is a great place to start.

How Is BGC Group's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as BGC Group's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a decent 13% gain to the company's revenues. The solid recent performance means it was also able to grow revenue by 5.6% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Looking ahead now, revenue is anticipated to climb by 13% during the coming year according to the lone analyst following the company. That's shaping up to be materially higher than the 6.7% growth forecast for the broader industry.

With this information, we find it odd that BGC Group is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Final Word

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

To us, it seems BGC Group currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. There could be some major risk factors that are placing downward pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

You always need to take note of risks, for example - BGC Group has 2 warning signs we think you should be aware of.

If these risks are making you reconsider your opinion on BGC Group, explore our interactive list of high quality stocks to get an idea of what else is out there.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.