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Virtu Financial (VIRT) Soars 45.9% YTD: More Room to Run?

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Virtu Financial Inc. (VIRT - Free Report) has been investors’ favorite on the back of its growth amid the current market volatility.

Year to date, this Zacks Rank #3 (Hold) stock has surged 45.9% against its industry’s decline of 9.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.



The leading provider of financial services and products has been benefiting from the COVID-19-led market uncertainty.

While most companies suffered a setback from the prevalent pandemic crisis, Virtu Financial earned a sweet spot due to turbulence in the market. Being a high-frequency trader, the company took a hit from an uninterrupted financial market in recent years. However, the pandemic proved to be a boon as market volatility soared. With greater instability, the need for liquidity increases, which in turn, provides the company with more trading and profit-making opportunities.

Recently, Virtu Financial delivered second-quarter 2020 earnings per share of $1.72, beating the Zacks Consensus Estimate by 9.6%. Moreover, the bottom line skyrocketed 975% year over year. Revenues of $669 million also soared 180% year over year on the back of a heightened market disruption, bid-ask spreads, and trading volumes and asset classes. Moreover, the top line surpassed the consensus mark by 3.4%.

Further, the company’s diversified business strengthens its position for the long haul. It has been witnessing growth in both its customer and non-customer market-making businesses.

Its Market Making segment is steadily contributing a lion’s share to the company’s overall revenues. The segment also witnessed organic growth in its non-customer Market Making business on the back of recently launched Marketing Making strategies in Europe, improvement in exchange-traded products block desk and better options capabilities. Market Making segment also benefited from KCG Holdings Inc.’s quantitative market making strategies. Revenues from this segment again skyrocketed 210.3% in the first six months of 2020. We expect this segment to continue performing well on the growing retail engagement and market volatility.

The company’s Execution Services Segment comprises agency-based trading and trading venues. The segment has been gaining from the ITG buyout, which diversified its revenues along with leveraging its core technology. ITG helps brokers and asset managers reduce the cost of implementing investments via technology-enabled liquidity, execution, analytics and workflow solutions. In the first six months of 2020, revenues from this segment grew 41.6% year over year. We expect the same to make a consistent progress, given the current market scenario.

Over the past 60 days, the stock has seen its 2020 and 2021 earnings estimates move north 0.4% and 6.5%, respectively.

Is Further Upside Left?

The company’s return on equity — a profitability measure — stands at 38.6%, higher than the industry average of 21.5%.

Its 2020 earnings estimate is pegged at $5.28, indicating an upside of 450% from the year-ago reported figure.

Given the existing market condition, we expect the company to continue gaining traction from solid segmental contributions and COVID-19 led market unpredictability.

Stocks to Consider

People interested in the finance sector may consider some better-ranked stocks like MoneyGram International, Inc. , TCG BDC, Inc. (CGBD - Free Report) and PRA Group, Inc. (PRAA - Free Report) .

MoneyGram International is a leading global financial technology company that provides innovative services around the world. The company currently has a Zacks Rank #2 (Buy) and a trailing four-quarter surprise of 14.8% (beating estimates in two quarters while missing the mark in the remaining two), on average.

TCG BDC is an externally managed specialty finance company. The stock currently has a Zacks Rank of 2 and its bottom line managed to beat estimates in two of the last four quarters, missing the same in the other two. The average surprise is 5.1%.

PRA Group is a global financial and business services company. Its earnings managed to deliver a trailing four-quarter beat of 38.8%, on average. The stock currently sports a Zacks Rank #1.

Zacks Top 10 Stocks for 2020

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PRA Group, Inc. (PRAA) - free report >>

Virtu Financial, Inc. (VIRT) - free report >>

Carlyle Secured Lending, Inc. (CGBD) - free report >>

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