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Publication date: October 3, 2024
On April 19 of this year, we covered Flow Traders and explained why you would do well to put this stock in your portfolio once the price is at historically low levels. Today we take a brief look back but mostly forward because the stock has good potential for the near future again!
Introduction to Flow Traders
Flow Traders is a leading global liquidity provider for stock market trading, ensuring that you can always trade on the stock market. The company provides liquidity by continuously quoting buy and sell prices, which helps to ensure that markets operate efficiently. To do this, Flow Traders uses advanced technology to trade a wide range of financial instruments, including ETFs (Exchange-Traded Funds), stocks, bonds, currencies, and commodities.
Founded in 2004, the company is headquartered in Amsterdam and has offices in cities such as New York, London and Singapore. Flow Traders focuses heavily on automation, using algorithms and advanced technologies to facilitate its market-making activities. By leveraging these tools, Flow Traders minimizes transaction costs, allowing them to generate revenue through bid-ask spreads instead of charging commissions or fees. Their business model is based on capturing small spreads over a large volume of trades, allowing them to remain profitable regardless of market conditions. The firm is known in the financial world for its robust risk management and innovative trading strategies.
The current situation at Flow Traders
Flow Traders itself reports that it is in a phase of strategic growth and expansion. As of Q3 2024, the company sees strong financial performance, with notable increases in total income and profitability. In Q2 2024, Flow Traders reported a 48% increase in total income year-on-year, to €76.2 million, and a significant six-fold increase in EBITDA, demonstrating strong operational efficiency. Their trading income also grew to €79.5 million, with a 56% return on trading capital.
But to take advantage of opportunities in emerging markets, Flow Traders has implemented a trading capital expansion plan. This involves suspending dividend payments to increase their capital reserves for trading and growth initiatives.
The company has also secured a €25 million bank loan to support this expansion. In addition, Flow Traders is diversifying its revenue streams by expanding into new asset classes and regions, positioning itself as a broader financial technology company beyond its traditional strength in Exchange-Traded Products (ETPs). Despite these positive developments, Flow Traders is focusing on cost control, with operating expenses remaining stable and technology investments continuing to play a critical role in their strategy. They are also working on a share repurchase program and exploring further debt financing options to support their growth ambitions.
October 31, Flow Traders will come out with numbers and we will see how the plan pans out for the company for now.
What did the stock price do and what should we expect?
We first look at the big picture as we did in the April 19 article. Below is the price chart from the beginning of 2017. We consistently see support in the €16 to €19 zone and clear resistance in the €35 to €38 zone. Typical for a company like Flow Traders that has to have hectic financial markets. This comes back again and again and also ebbs away.
Below is the price chart as of April 1, 2024.
On the left, we can indeed see that the price is once again holding the support zone but what is particularly striking is of course the price plunge to the lowest level since its listing on the Amsterdam Stock Exchange in 2017. This was on July 25 when Flow Traders announced its numbers and its plan. Suspending dividends and taking out a bank loan was not appreciated by investors at the time.
In the meantime, we are more than two months down the road and once again we see the share price performing strongly. The news has been processed and the price is technically on breakout from a low.
What is the concrete expectation of Flow Traders?
The stock price suffered a lot last summer. This was because the company has a plan for the future and had to leave certain things for the short term before that, such as paying dividends. A plan has yet to work and creates a level of uncertainty resulting in an exaggerated price reaction.
The share price is holding technical support within the well-known €16 to €19 zone and is on a breakout.
Tension in the financial markets is increasing due to the possible escalation in the situation in the Middle East. This may give an additional push to Flow Traders' share price.
Our expectation is a short-term rise in the share price to € 25,-/ € 26,-. For the long term, the price may continue to the well-known € 35. The latter, of course, depends on the figures and reports that Flow Traders publishes on October 31.
Disclaimer: Investing involves risk. Our analysts are not financial advisors. Always consult an advisor when making financial decisions. The information and tips provided on this website are based on our analysts' own insights and experiences. They are therefore for educational purposes only.
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