Cost optimization related to the GFT acquisition is key to future share price developments
In the aftermath of its Q4 earnings report, shares of publicly traded retail and institutional forex broker GAIN Capital (NYSE:GCAP) have soared more than 12% as investors appeared confident in the company’s ability to optimize its cost structure to successfully integrate its GFT acquisition dating from last year. Despite lower profit numbers coming with record revenues, shares closed above the $10 mark, testing recent mid-February highs.
While we still remain way off last year’s peak above $14.50, in our view, it would be a mistake to think that there is not much upside left for the company. Granted, the GFT acquisition has been a big risk, but at the end it is starting to pay off, and with estimated cost optimization cutting between $35-45 million from the company’s expenses throughout 2014, a sustained break higher, could put upside pressure to the company’s share prices and bring back into perspective last year’s short-lived all-time highs.
That said, looking forward, we would be keenly awaiting volume numbers and cost optimization news in the coming quarters. The key to increasing revenues in this case is reducing costs, as we have already seen revenues climb quite nicely. The continued integration of GFT will no doubt achieve that, while the company is achieving impressive organic growth and has no plans to abandon its strategy in this direction.
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