StoneX currently trades at $129.54 and has been a dream stock for shareholders. It’s returned 386% since February 2021, blowing past the S&P 500’s 75.1% gain. The company has also beaten the index over the past six months as its stock price is up 34.2% thanks to its solid quarterly results.

Is now the time to buy StoneX, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Is StoneX Not Exciting?

We’re glad investors have benefited from the price increase, but we're swiping left on StoneX for now. Here are three reasons we avoid SNEX and a stock we'd rather own.

1. EPS Barely Growing

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

StoneX’s EPS grew at a weak 1.7% compounded annual growth rate over the last five years, lower than its 22.2% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

2. Substandard TBVPS Growth Indicates Limited Asset Expansion

We consider tangible book value per share (TBVPS) an important metric for financial firms. TBVPS represents the real, liquid net worth per share of a company, excluding intangible assets that have debatable value upon liquidation.

Although StoneX’s TBVPS increased by 16.5% annually over the last five years, growth has recently decelerated to a mediocre 6.6% over the past two years (from $29.68 to $33.75 per share).

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

StoneX currently has $20.18 billion of debt and $2.52 billion of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 7.8×. We think this is dangerous - for a financials business, anything above 3.5× raises red flags.

Final Judgment

StoneX isn’t a terrible business, but it isn’t one of our picks. With its shares beating the market recently, the stock trades at 2.3× forward P/E (or $129.54 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are superior stocks to buy right now. We’d suggest looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.

Stocks We Would Buy Instead of StoneX

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