NEW YORK (TheStreet) -- Shares of FXCM (FXCM) are jumping, up 7.14% to $2.55 in early market trading Wednesday, after the company announced its decision to forgive about 90% of its clients who incurred negative balances in certain jurisdictions on January 15 as a result of the Swiss National Bank move.
The company noted that the Swiss bank's unexpected move to abandon its three-year cap on the franc caused extreme price movements and resulted in the lack of liquidity, leaving many market participants to incur trading losses.
New York City-based FXCM is an online provider of foreign exchange trading and related services to approximately 183,679 active retail customers, offering access to over-the-counter foreign exchange markets through its technology platform and an agency model to execute their trades.
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Separately, TheStreet Ratings team rates FXCM INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate FXCM INC (FXCM) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 11.7%. Since the same quarter one year prior, revenues slightly increased by 2.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 146.7% when compared to the same quarter one year prior, rising from -$5.12 million to $2.39 million.
- FXCM INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, FXCM INC increased its bottom line by earning $0.48 versus $0.38 in the prior year. For the next year, the market is expecting a contraction of 35.4% in earnings ($0.31 versus $0.48).
- The gross profit margin for FXCM INC is rather low; currently it is at 22.33%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.06% significantly trails the industry average.
- Net operating cash flow has significantly decreased to -$8.64 million or 118.88% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full analysis from the report here: FXCM Ratings Report