Further Upside For Marex Group plc (NASDAQ:MRX) Shares Could Introduce Price Risks After 26% Bounce

Marex Group plc (NASDAQ:MRX) shareholders have had their patience rewarded with a 26% share price jump in the last month. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

Although its price has surged higher, given about half the companies in the United States have price-to-earnings ratios (or "P/E's") above 17x, you may still consider Marex Group as an attractive investment with its 13.7x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

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Recent times have been advantageous for Marex Group as its earnings have been rising faster than most other companies. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Check out our latest analysis for Marex Group

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Marex Group .

How Is Marex Group's Growth Trending?

Marex Group's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

If we review the last year of earnings growth, the company posted a terrific increase of 52%. The strong recent performance means it was also able to grow EPS by 203% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 12% per annum during the coming three years according to the seven analysts following the company. With the market predicted to deliver 11% growth per annum, the company is positioned for a comparable earnings result.

With this information, we find it odd that Marex Group is trading at a P/E lower than the market. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On Marex Group's P/E

Marex Group's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Marex Group currently trades on a lower than expected P/E since its forecast growth is in line with the wider market. When we see an average earnings outlook with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for Marex Group with six simple checks on some of these key factors.

Of course, you might also be able to find a better stock than Marex Group. 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.