MarketAxess Holdings Inc. MKTX appears attractive to us, given its consistently strong operating performance over the last several quarters, launch of services and the recent acquisition of Liquidity Edge, which further buoy optimism for its long-term prospects.
Year to date, this currently Zacks Rank #2 (Buy) stock has rallied 30% compared with its industry’s increase of 0.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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The above price performance looks stellar in comparison to other companies’ stock movements in the same space, such as Intercontinental Exchange (NYSE:ICE) Inc. ICE and Nasdaq, Inc. NDAQ, which have gained 6.5% and 21.8%, respectively. Meanwhile, CME Group Inc. (NASDAQ:CME) CME has lost 16.3% during the same time frame.
Let’s analyze the factors that make this Zacks Rank #2 (Buy) stock a compelling choice for investors right now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
An Outperformer: MarketAxess has surpassed its industry on a year-to-date basis. The stock has gained 27.4% compared with the industry’s increase of 0.1%.
Solid Prospects: The Zacks Consensus Estimate for MarketAxess’s current-year earnings indicates a 39.6% improvement from the year-ago reported figure, higher than the industry’s expected earnings growth of 12.2%.
The scenario is impressive with respect to revenues as well. For 2020, the Zacks Consensus Estimate for the company’s top line stands at $672.33 million, implying 31.5% growth from the year-earlier reported number.
Impressive Earnings Surprise History: MarketAxess has a pleasant earnings surprise record. The company’s bottom line outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed the mark in one. The average earnings beat is 2.49%.
Superior Operating Profit: MarketAxess’ trailing 12-month return on equity (ROE) reinforces its growth potential. The company’s ROE of 33.8% has improved in the past four years, comparing favorably with the industry’s ROE of 12.3%. This, in turn, reflects its tactical efficiency in utilizing its shareholders’ funds.
Business Tailwinds: The company’s total trading volumes have been expanding over the past many years and the same increased in the first six months of 2020. Investment in technology, unveiling of trading platforms and acquisitions aided growth.
New business initiatives taken by the company to build a sustainable long-term growth trajectory will further drive its business performance and its stock, eventually.
The company is also gaining traction from the automation and credit trading. Automated trading volumes rose to more than $32 billion in the second quarter, up 66% year over year. Despite the ongoing market volatility, the company continues to see solid growth in its automated trading solutions as both investors and dealer clients look to improve their trading efficiency.
Acquisition of Liquidity Edge: Recently, the company completed the acquisition of Liquidity Edge, a leading U.S. treasuries trading venue. This buyout brings streaming treasury liquidity and trading capabilities to MarketAxess. The deal provides the dealers with a strategic opportunity to grow their business by building custom dealer to client connections. The acquisition also supports the company’s further expansion of its treasury hedging capabilities.
In addition, we are encouraged by the company’s efforts to reward its shareholders through dividends and buybacks. A solid free cash-flow generation bolsters the shareholder-friendly activities of the company.
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Intercontinental Exchange Inc. (ICE): Free Stock Analysis Report
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