Shares of MarketAxess Holdings Inc. MKTX have surged 23% year to date, significantly outperforming the 5.3% gain for the Zacks categorized Securities Exchanges industry. We are hopeful of further gain in the stock, given the company’s strength in several areas.
The company performed better than other players in the same space like CBOE Holdings, Inc. CBOE, CME Group Inc.’s CME and Intercontinental Exchange Inc. ICE which returned 10.34%, 1.06% and 6.04%, respectively, in the same timeframe.
What Led to the Price Rise?
The company has been experiencing top-line growth on improving trading volumes. In recent years, MarketAxess managed to register decent growth in commissions, which constituted nearly 90% of the company’s total revenue. Commissions grew at a CAGR of 11% over the past three years (2012–2016), primarily driven by rising volumes. Notably, given the rising interest rate environment in an improving U.S. economy, strengthening dollar, management expects continued healthy inflows from Europe and Asia in U.S. credit products.
Along with top-line growth, its bottom line has been consistently increasing. Its earnings per share witnessed a 14% rise in the last three years. Moreover, the company remains well poised for growth on the back of its strong market position.
Also, MarketAxess should continue to benefit from its international business, with strength in both emerging markets and Eurobond space. The company’s continued focus on its ongoing investments in Open Trading, protocols and new products to expand geographic reach and infrastructure also raise our optimism.
MarketAxess has been able to achieve this superior performance because of its strong capital position and steady capital deployment. Driven by financial strength, MarketAxess remains committed to boosting shareholders’ value. Notably, dividends and share repurchases totaled $63 million or about 46% of free cash flow in 2016.
In Jan 2017, the company raised its quarterly cash dividend by 27% to 33 cents per share, marking an increase in dividend for the seventh consecutive years. Further, as of Dec 31, 2016, shares worth about $51.1 million were available for repurchase under its existing program.
Over the past 90 days, the Zacks Consensus Estimate for the current year advanced 13% to $3.98. Also, for 2018, it increased 2% to $4.70. The positive earnings estimate revisions indicate analysts’ confidence in the stock.
MarketAxess carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
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