Sentiment Still Eluding BGC Group, Inc. (NASDAQ:BGC)

With a price-to-sales (or "P/S") ratio of 1.8x 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 3x and even P/S higher than 8x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for BGC Group

What Does BGC Group's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, BGC Group has been doing relatively well. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Want the full picture on analyst estimates for the company? Then our free report on BGC Group will help you uncover what's on the horizon.

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.

If we review the last year of revenue growth, the company posted a worthy increase of 6.4%. However, this wasn't enough as the latest three year period has seen an unpleasant 6.0% overall drop in revenue. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 13% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 8.8%, which is noticeably less attractive.

With this in consideration, we find it intriguing that BGC Group's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Final Word

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a 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. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Before you take the next step, you should know about the 4 warning signs for BGC Group that we have uncovered.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.