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MarketAxess Holdings Inc. MKTX looks an attractive bet, given its consistently strong operating performance over the past several quarters, launch of new product and services, and the recent acquisition announcements, which raise optimism about its long-term prospects.
Year to date, this currently Zacks Rank #2 (Buy) stock has surged 47.3% compared with its industry’s rally 8.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Let’s delve deeper into the factors that make this stock a compelling choice for investors right now.
Earnings Estimates Moving North: Annual estimates for MarketAxess have been revised upward over the past 60 days, instilling analysts’ confidence in the stock. Over this period, the Zacks Consensus Estimate for current-year earnings has climbed 2.9% to $7.7.
Given the wealth of information at their disposal, it is in the best interest of investors to be guided by broker advice and the direction of their estimate revisions. This is because the direction of estimate revisions serves as an important pointer when it comes to ascertaining the price of a stock.
Solid Prospects: The Zacks Consensus Estimate for MarketAxess’ current-year earnings indicates a 42.78% improvement from the prior-year reported number. The same is also higher than the industry’s expected earnings growth rate of 14.8%.
The scenario is impressive with respect to revenues as well. For 2020, the Zacks Consensus Estimate for the company’s top line stands at $681.97 million, implying 33.4% growth from the year-ago reported figure.
Impressive Earnings Surprise History: MarketAxess has a stellar earnings surprise record. The bottom line outpaced the Zacks Consensus Estimate in each of the last four quarters, the average being 2.71%.
Superior Operating Profit: MarketAxess’ trailing 12-month return on equity (ROE) reinforces its growth potential. The company’s ROE of 33.4% has improved over the past four years and is above the industry’s average of 11.7%. This upside also reflects its efficiency in utilizing its shareholder’s funds.
Business Tailwinds: The company’s total trading volumes have been on a rise over the past many years and the same increased in the first nine months of 2020 Investment in technology, unveiling of trading platforms, open trading and acquisitions led to this upside.
The company is gaining traction from the automation and credit trading. Automated trading volumes rose to more than $30 billion in the third quarter, up 33% year over year. As the market increasingly adopts electronic trading solutions, the company will continue to see substantial progress in its automated trading capabilities.
Another achievement is the company’s acquisition of Liquidity Edge, which provided it with an attractive entry point to the U.S. bond Treasury market.
The company is on track to buy MuniBrokers and Deutsche Börse Regulatory Reporting Hub. Purchase of the Regulatory Reporting Hub will help further expand MarketAxess’ post-trade reporting and pre- and post-trade data service services across a broader European client base, particularly in Germany, France and the Nordic region. The MuniBrokers acquisition will broaden the company’s existing municipal bond trading solution for global institutional investors and dealer clients.
New product initiatives, such as Live Markets and Mid-X are driving innovation and will aid the company to bolster its global footprint. Live markets aim to bring new liquidity to the credit markets and reduce trading friction through efficient technology designed to enhance liquidity and improve transaction costs. Mid-X launched in October, offers fully anonymous matching sessions andcreates cost savings for clients. The first session attracted a mix of both dealers and investor clients.
The company’s solid growth in core products, superior financial model, large and increasing addressable market, significant operating leverage and an expanded suite of electronic trading protocols bode well for the long haul.
Other securities exchange companies in the same space including Intercontinental Exchange Inc. ICE and Nasdaq, Inc. NDAQ have gained 9.6% and 9.3%, respectively, while CME Group Inc. CME has lost 1.4% during the same time frame.
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MarketAxess Holdings Inc. (MKTX) : Free Stock Analysis Report
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