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"We rate FXCM INC (FXCM) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, disappointing return on equity, poor profit margins and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- FXCM's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 86.85%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, FXCM is still more expensive than most of the other companies in its industry.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, FXCM INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- 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.
- 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).
- You can view the full analysis from the report here: FXCM Ratings Report