Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model. NEW YORK ( TheStreet) -- GAIN Capital Holdings (NYSE: GCAP) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and poor profit margins.
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- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 38.94%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 60.00% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- GAIN CAPITAL HOLDINGS INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, GAIN CAPITAL HOLDINGS INC reported lower earnings of $0.40 versus $1.21 in the prior year. For the next year, the market is expecting a contraction of 22.5% in earnings ($0.31 versus $0.40).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Diversified Financial Services industry. The net income has significantly decreased by 57.7% when compared to the same quarter one year ago, falling from $7.62 million to $3.22 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Diversified Financial Services industry and the overall market, GAIN CAPITAL HOLDINGS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for GAIN CAPITAL HOLDINGS INC is rather low; currently it is at 21.80%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 8.04% trails that of the industry average.
-- Written by a member of TheStreet Ratings Staff