GAIN Capital Holdings Inc. Stock Upgraded (GCAP)

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 upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

  • EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.9%. Since the same quarter one year prior, revenues slightly increased by 2.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • GCAP has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign.
  • GAIN CAPITAL HOLDINGS INC's earnings per share declined by 10.0% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, GAIN CAPITAL HOLDINGS INC reported lower earnings of $0.04 versus $0.40 in the prior year. This year, the market expects an improvement in earnings ($0.36 versus $0.04).
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. 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.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, GCAP has underperformed the S&P 500 Index, declining 16.00% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
.

GAIN Capital Holdings, Inc., through its subsidiaries, provides online trading services worldwide. It specializes in over-the-counter (OTC) markets, including spot foreign exchange and precious metals, as well as contracts-for-difference. The company has a P/E ratio of 29.7, above the S&P 500 P/E ratio of 17.7. GAIN has a market cap of $146.1 million and is part of the financial sector and financial services industry. Shares are up 6.6% year to date as of the close of trading on Friday.

You can view the full GAIN Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

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.

It's Official: Action Alerts PLUS beats the S&P 500 with Dividends Reinvested! Cramer and Link were up 16.72% in 2012. Were you? See what they are trading for 14-days FREE.
null

If you liked this article you might like

IG Group Sees Stock Rise But Regulatory Shadow Looms

U.K. Market Watchdog's Rule Proposals Hit Retail Financial Services Stocks Hard

Brokers Are Not Yet Brexit Beneficiaries

Brokers Are Not Yet Brexit Beneficiaries

Insider Trading Alert - GEVO, SBH And GCAP Traded By Insiders

Insider Trading Alert - CNBKA, GCAP And STT Traded By Insiders