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BGC Partners, Inc. (NASDAQ:BGCP), which is in the capital markets business, and is based in United States, saw a decent share price growth in the teens level on the NASDAQGS over the last few months. As a US$2.3b market cap stock, it seems odd BGC Partners is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Let’s take a look at BGC Partners’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What’s the opportunity in BGC Partners?According to my valuation model, BGC Partners seems to be fairly priced at around 18.24% above my intrinsic value, which means if you buy BGC Partners today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $5.18, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because BGC Partners’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from BGC Partners?Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of BGC Partners, it is expected to deliver a highly negative revenue growth over the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Currently, BGCP appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on BGCP for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on BGCP should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on BGC Partners. You can find everything you need to know about BGC Partners in the latest infographic research report. If you are no longer interested in BGC Partners, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.