Foreign exchange trading technology company GAIN Capital (NYSE:GCAP) posted earnings that delighted investors, sending shares up as much as 20%. As of noon EDT Friday, the stock is up approximately 16%.
GAIN Capital's revenue grew by 13% year over year, and adjusted EPS came in at $0.05, a big improvement over the $0.12 loss the company posted a year ago. GAIN's OTC volume increased by 6%, while its ECN (electronic communication network) trading volume grew by an impressive 53%. EBITDA more than quadrupled, from $3.3 million in the third quarter of 2016 to $14.7 million.
The market has experienced extremely low volatility over the past few years, and this has caused a low level of trading activity in many areas of the financial industry. In fact, in the big U.S. banks that engage in investment banking activities, trading revenue was a weak spot across-the-board in the third quarter.
In GAIN's case, the ability to grow revenue and earnings despite a weak environment for trading-related businesses is certainly a promising sign. GAIN Capital's CEO Glenn Stevens said, "Our solid third-quarter results reflect GAIN's ability to continue to execute and create value, even amid a period of multi-year low volatility levels."
GAIN Capital says that its focus on organic growth and cost management is driving 2017's results. To drive future growth, the company is on the lookout for acquisition opportunities; it recently raised $92 million through a convertible debt offering which gives it the financial flexibility to pursue its growth agenda.
It's also worth noting that when the capital raise was announced, about two months ago, the stock plunged by 10% on an increased level of perceived risk. The company's third-quarter earnings seem to have put shareholders' minds at ease, as the stock has erased that loss and then some.