MarketAxess Holdings Inc. ( MKTX Quick Quote MKTX - Free Report) is well-poised for growth, given its efficient automated trading solutions, higher trading volumes and strong client network.
The company’s trailing 12-month return on equity (ROE) of 33.4% as of Sep 30, 2020, has not only risen from the 2019-end level but is also higher than the
industry’s average of 11.7%. This highlights the company’s tactical utilization of shareholders’ funds.
The Zacks Consensus Estimate for 2020 earnings indicates an improvement of 43.7% from the year-ago reported figure. The company also has an impressive surprise history, with a trailing four-quarter surprise of 2.71%, on average.
Factors Benefiting MarketAxess
This Zacks Rank #3 (Hold) company has been expanding its presence in the U.S. credit market on the back of its Open Trading platform. The platform makes way for hassle-free trading by communicating worldwide market participants with more than 1,700 active institutional investor and dealer firms, thereby, delivering cost savings by accelerating trading efficiencies.
Notably, MarketAxess first launched the platform in the U.S. credit market in 2013, followed by introducing the same for the EU credit market and Asia clients in 2015 and 2017, respectively.
Moreover, the company has emphasized the increased adoption of electronic trading for fixed-income participants. With the fixed-income industry undergoing a major shift to electronic trading, MarketAxess enhanced its product portfolio for recording a rise in trading volumes and the company’s efforts have been bearing fruits.
A consistent rise in trading volumes has resulted from market share gains and constant client additions. The company’s automated trading solutions have led to more than 158,000 trades completed utilizing automated execution in third-quarter 2020, which indicates a substantial rise from 115,000 trades in the prior-year quarter. Last month, MarketAxess unveiled a centralized fixed-income trading solution, which consolidates credit and rates trading capabilities into the company’s system.
For further strengthening its capabilities, MarketAxess has been riding on a buyout binge among which notable ones include LiquidityEdge, MuniBrokers and the latest addition being that of Regulatory Reporting Hub.
Additionally, the company has been backed by solid cash-generation abilities, which have paved the way for it to pursue growth initiatives but also undertake prudent capital deployment through share repurchase and dividend hikes.
Shares of MarketAxess have gained 47.8% in a year compared with the industry’s rally of 12.6%.
However, the company’s elevated costs remain worrisome. Notably, MarketAxess anticipates expenses near or close to $314 million for 2020, which is the upper end of the company’s guidance of $297-$314 million.
Nevertheless, its several growth initiatives are likely to help the stock continue performing well in the days ahead.
Stocks to Consider
Some better-ranked stocks in the same space are
Nasdaq, Inc. ( NDAQ Quick Quote NDAQ - Free Report) , Cboe Global Markets, Inc. ( CBOE Quick Quote CBOE - Free Report) and OTC Markets Group Inc. ( OTCM Quick Quote OTCM - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see . the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Nasdaq, Cboe Global and OTC Markets Group have a trailing four-quarter earnings surprise of 4.19%, 6.17% and 11.96%, on average, respectively.
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