Amid the coronavirus pandemic, it seems to be a wise idea to add GAIN Capital Holdings Inc (GCAP - Free Report) stock to your portfolio now, given the strength in its fundamentals and solid growth prospects. Also, its revenue growth prospects and cost management are impressive.
The company has been witnessing upward estimate revisions, reflecting analysts’ optimism about its earnings growth potential. Over the past 30 days, the Zacks Consensus Estimate for 2020 earnings has displayed an upward trend.
This Zacks Rank #1 (Strong Buy) stock has appreciated 55.4%, in the last six months, compared with the industry’s decline of 13.8%.
Why is GAIN Capital a Golden Egg?
Revenue Strength: Though the company has witnessed a decline in net revenues over the last three years, total revenues are projected to grow at a rate of 70.4% in 2020 (compared with the negative industry average of 2.2%). This upward trend is anticipated to be supported by a decent lending scenario and GAIN Capital’s efforts to grow fee income.
Steady Capital-Deployment Activities: The company remains committed to enhancing its shareholders’ value. In 2018, it announced the expansion of its share-buyback program to $50 million. Further, the company has been actively paying common stock dividends for years, with the latest hike in November 2016.
Earnings per Share Growth: GAIN Capital’s earnings for 2020 are projected to increase significantly compared with the industry’s negative average of 23.1%. This earnings momentum is likely to continue in the near term, as reflected by the company’s impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed in one.
The company has a Growth Score of B. Our research shows that stocks with the combination of a Style Score of A or B, and a Zacks Rank #1 or 2 (Buy), offer the best upside potential.
Prudent Expense Management: The Bedminster, NJ-based lender has successfully reduced its operating expenses at a CAGR of 5.8% in the last five years (ended 2019). Such cost-management initiatives will keep supporting its bottom-line growth.
Superior Return on Equity (ROE): GAIN Capital’s ROE of 28.62%, compared with the industry’s 14.39% average, highlights the company’s commendable position over its peers.
Stock Looks Undervalued: GAIN Capital looks undervalued, with respect to price/earnings (P/E) (F1) and price/book value (P/B) ratios. It has a P/E (F1) ratio of 2.45, which is below the industry average of 13.44. Also, its P/B ratio of 1.02 is lower than the industry average of 1.35.
Additionally, the stock currently has a Value Score of B. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of “value traps” and identify stocks that are truly trading at a discount.
Other Stocks to Consider
Tradeweb Markets Inc (TW - Free Report) has witnessed upward earnings estimate revisions for 2020 over the past 60 days. Moreover, this Zacks #1 Ranked stock has gained 39.1% over the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
BGC Partners Inc (BGCP - Free Report) current-year earnings estimate moved north in 60 days’ time. Further, the company’s shares have declined 51.9% over the past six months. At present, it holds a Zacks Rank of 2.
Mackinac Financial Corporation (MFNC - Free Report) has witnessed upward earnings estimate revision for 2020 in the past 60 days. This Zacks #2 Ranked stock has depreciated 38.5% over the past six months.
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