Analysis: GAIN Capital Looks to Build on Previous Growth

GAIN Capital Holdings (GCAP) has been in the spotlight as of late, having reported uneven financial metrics to start out the 2014 year – alternatively, investors have been the prime beneficiaries of the company stock, whose shares have notched robust gains in recent months.

New Jersey-based GAIN Capital is a leading provider of financial services, including Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term, CFDs and ETFs for a multitude of retail clients. The company recently reported its February operating metrics, which underscored acute drops across retail and institutional volumes (-20% and -16% MoM respectively). This report comes on the heels of an already released Q4 statement that was characterized as executing healthy growth across the board – a notable accomplishment for the company given the fact that currency Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad Read this Term sits at 5-year lows.

YoY Performance Indicative of Staunch Growth

However, there are a variety of perspectives of the company’s metrics across different vantage points, i.e. YoY, MoM, or stock performance. To begin, the 2013 year was viewed as a strong year for GAIN Capital, headlined by a 60.8% increase in trading revenue in the year ending December 31, 2013 ($205.1 million from $127.5 million in 2012) – alternatively, net revenue soared 76% over this same time frame ($266.4 million vs. 151.4 million YoY).

According to Glenn Stevens, CEO of GAIN Capital, in a statement on the YoY metrics, “One of our primary objectives was to continue to grow the company and have consolidation and acquisition be part of that strategy. 2013 gave out the successful acquisition of GFT that significantly increased GAIN’s product offering and scale, and most importantly, the operating synergies that we model into that acquisition are absolutely on track and some case ahead of schedule.”

Large gains were not simply localized to revenues, but also across retail and institutional volumes for the 2013 year as well. The paramount constituent of retail volume – OTC Trading volume – witnessed a surge of 70% YoY ($508.0 billion compared with $298.8 billion YoY). Moreover, total institutional volumes also netted sterling growth during the 2013 calendar year, led by an increase of 105% YoY ($1104.0 billion vs. $538.4 billion in the year ending 2012).

February Metrics Disappoint, 2014 Year Reveals Checkered Results

After a highly successful start to the 2014 year that showed January trading and institutional volumes explode 40% and 30% respectively MoM, February put a damper on staunch growth margins. Per the results of a recent February release from GAIN Capital, retail volumes yielded a retreat of -20.3% MoM, having posted just $169.3 billion during the month of February. Furthermore, total institutional trading volume was reported at just $412.7 billion during the month of February, a decrease of -16.4% MoM.

The Real Winners: Shareholders

Amid fluctuations in trading volumes and revenues recently, the one constant exhibited across the board has been in highly robust share prices in the company’s stock (GCAP). Having risen out of the doldrums at a 52-week low of just $3.97 per share, share prices now trade at $10.55. Year-to-date, shares have also exploded 40.5% after starting off 2014 with a valuation of $7.51 per share.

Despite the recent rise in fortunes and February metrics that leave a lot to be desired, the company is still rated a strong buy by several analysts, including Zacks. According to Forex Magnates' research, GCAP is nearly 38% below its 52-week high of $14.62 reported last September leaving healthy room for growth.