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MarketAxess Holdings Inc. MKTX remains well-poised to gain on the back of growing revenues, robust trading volumes and solid presence in the Open Trading marketplace.
Shares of the company have gained 54.9% in a year compared with the industry’s growth of 24.6%. The Zacks S&P 500 composite has risen 43.8% in the said time frame. With a market capitalization of $19.6 billion, the average volume of shares traded in the last three months was 29.1 million.
Over the past 30 days, the company’s 2021 earnings estimates have moved north by 0.6%, reflecting investors’ optimism surrounding the stock.
The company’s trailing 12-month return on equity (ROE) of 34.2% remains higher than the industry’s ROE of 11.8%. This highlights tactical efficiency in using shareholder’s funds.
Will the Bull Run Continue?
This Zacks Rank #3 (Hold) leading electronic platform operator has been benefiting from growing revenues, which has been fueled by higher commissions. The trend continued in 2020 as well, wherein commissions provided a boost to revenue growth of 35%. The company’s core product offerings of U.S. High Grade, U.S. High Yield, Eurobond and Emerging Markets have been gaining momentum from accelerating market share gains, which is likely to bolster revenues in the days ahead.
Notably, the Zacks Consensus Estimate for 2021 revenues suggests year-over-year growth of 15.2% from the 2020 reported figure.
Commission, the most important driver of the company’s revenues, has been gaining traction from the COVID-19 pandemic induced market volatility. Continued uncertainty has aided the company by boosting its trading volumes, which in turn, has driven commission. The recently reported February total monthly trading volume of $610.4 billion for February reflects an improvement of 3.1% year over year. Also, the company’s average daily volume (ADV) for the month grew 3.1% year over year.
Moreover, MarketAxess resorts to buyouts and collaborations for bolstering its product portfolio and extending its global reach. The company boasts of a well-established presence in the Open Trading marketplace, which leads to reduced transaction costs. Case in point, the company recorded estimated transaction cost savings of $1.1 billion during 2020. The company’s automated trading solutions continue to be in high demand, given more than 163,000 trades were completed utilizing automated execution in fourth-quarter 2020. The figure reflects a substantial rise from 127,000 trades reported in the prior-year quarter.
Furthermore, strong cash flows bode well for MarketAxess, which enables it to enhance shareholder value through share buybacks and dividend payments. With the recent dividend hike of 10%, the company has raised its dividend for 11 straight years at a CAGR of 22.6%.
The Zacks Consensus Estimate for the company’s 2021 earnings per share indicates year-over-year improvement of 8.9% from the 2020 reported figure.
Stocks to Consider
Some better-ranked stocks in the finance space include OTC Markets Group Inc. OTCM, Jefferies Financial Group Inc. JEF and Navient Corporation NAVI. While Jefferies Financial sports a Zacks Rank #1 (Strong Buy), OTC Markets Group and Navient carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
OTC Markets Group, Jefferies Financial and Navient have a trailing four-quarter earnings surprise of 11.96%, 333.78% and 24.52%, on average, respectively.
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