If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. To wit, the BGC Group, Inc. (NASDAQ:BGC) share price is 97% higher than it was a year ago, much better than the market return of around 25% (not including dividends) in the same period. That's a solid performance by our standards! It is also impressive that the stock is up 47% over three years, adding to the sense that it is a real winner.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
BGC Group was able to grow EPS by 22% in the last twelve months. The share price gain of 97% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 69.68.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that BGC Group has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
A Different Perspective
We're pleased to report that BGC Group shareholders have received a total shareholder return of 99% over one year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 16% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand BGC Group better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for BGC Group (of which 1 doesn't sit too well with us!) you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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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.