MarketAxess Holdings Inc. MKTX is poised well for growth on the back of a solid revenue stream and international business.
Estimates for the company have been revised upward over the past 30 days, reflecting analysts' optimism on the stock. The stock has seen the Zacks Consensus Estimate for both 2019 and 2020 earnings move 1.4% north.
The company has an impressive Growth Score of B.
Its return on equity — a profitability measure — improved over the past few years and now stands at 29.9%, above the industry's average of 11%. This, in turn, underlines the company’s efficiency in using its shareholders’ funds.
The company has also managed to pull off average four-quarter positive surprise of 4.57%.
Shares of this Zacks Rank #2 (Buy) company have soared 69.6% in a year’s time, outperforming its industry’s growth of 25%.
The company has been witnessing a steady revenue flow, which has been growing since 2005 (expect 2008 when the revenues dipped 0.6%). This upside is evident from its 2012-2018 CAGR of 14.6%. MarketAxess has been successful in expanding its trading volumes through inorganic and organic strategies. Given its consistent efforts, the company is expected to continue enjoying high-volume growth, which in turn, will add to its top line.
The company supplements its inorganic growth by entering into strategic alliances or by acquiring businesses or technologies, which enables it to enter new markets and provide new products or services. Over the past few years, its buyouts and alliances have aided it with technology solutions and also improved its range of trading connections available to the global credit market participants among other positives. All these initiatives bode well for the company’s growth.
MarketAxess’ flourishing international business also deserves special mention. MiFID II steadily leaves a positive impact on client-training behavior, leading to higher volumes with European clients, which further drives Eurobond volumes. Increase in the emerging market volume is also impressive. We expect the company’s thriving international business to bump up the overall revenues.
MarketAxess also enjoys a strong liquidity position, which is evident from its free cash flow. Its strong liquidity not only mitigates balance-sheet risks but also paves the way for an accelerated capital deployment for employees, trading platform, new products, geographical expansion and strengthening of infrastructure. It remains focused on enhancing shareholder value via share repurchase and dividend hikes. Another company from the same space, Cboe Global Markets, Inc. CBOE announced a quarterly cash dividend of 31 cents per share for the second quarter of 2019.
The Zacks Consensus Estimate for current-year earnings is pegged at $5.18, indicating an increase of 13.4% on 12.2% higher revenues of $488.64 million from the prior-year reported figures.
For 2020, the Zacks Consensus Estimate for earnings stands at $5.98 on $543.87 million revenues, suggesting a respective 15.4% and 13% rise from the year-ago reported numbers.
Other Key Picks
Investors interested in the finance sector can also take a look at some other top-ranked stocks like CME Group Inc. CME and Intercontinental Exchange Inc. ICE each carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CME Group operates contract markets for the trading of futures and options on futures contracts. It came up with average four-quarter positive surprise of 1.42%.
Intercontinental Exchange operates regulated exchanges, clearing houses and listings venues for the financial and commodity markets in the United States, the United Kingdom, Continental Europe, Asia, Israel and Canada. The company managed to pull off average four-quarter beat of 3.23%.
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