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Why Should You Add Virtu Financial (VIRT) to Your Portfolio?

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Virtu Financial Inc.  (VIRT - Free Report) has been favored by investors on the back of its solid segmental contributions and an impressive portfolio. Moreover, the current market volatility aided its performance.

Here we discuss the reasons to add this Zacks Rank #1 (Strong Buy) company to your investment portfolio.

Given the company’s strong fundamentals, it is well-placed for long-term growth.

While most companies suffered a setback from the prevalent pandemic crisis, Virtu Financial earned a sweet spot due to the market volatility. 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.

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

Further, its Market Making segment has been contributing a lion’s share to the company’s overall revenues. In the first quarter of 2020, adjusted net trading income from the segment skyrocketed 267% year over year.

Additionally, the company's Execution Services segment has been witnessing growth since the ITG buyout, which not only diversified its revenues but also bolstered its core technology.

The company has been taking strategic initiatives that poise it well for growth. For instance, it agreed to divest MATCHNow to Cboe Global Markets. Subject to certain closing conditions, the deal is expected to be completed in the third quarter of 2020. The net-after tax fund generated from this sell-off will be used by Virtu Financial to repay a portion of its outstanding term loan.

Per the last earnings call, management reported registering solid gains in April, which indicate its preliminary expectations. This leading provider of financial services and products also made a prepayment of around $188 million in principal toward its senior secured first lien term loan, which in turn, will help it save $7.3 million in annual interest expense.

It recently announced the preliminary estimate for second-quarter 2020 revenues through May 31, 2020.

On a preliminary basis, Virtu Financial expects its trading income, net, to be in the range of $460-$474 million for the two months ended May 31, 2020. Adjusted net trading income is anticipated between $425 million and $440 million.

The company projects average daily adjusted net trading income in the bracket of $10.37-$10.73 million per day. Its results are likely to reflect its strong fundamentals and benefits from the current situation.

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

Over the past 60 days, the company has seen its 2020 and 2021 earnings estimates move north 98.5% and 9.9%, respectively.

Price Performance

Shares of this company have surged 46.7% year to date against its industry’s decline of 12.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.



This stellar price performance also came against some other finance stocks’ depreciated values. Companies like Oaktree Specialty Lending Corp. (OCSL - Free Report) , Jefferies Financial Group Inc. (JEF - Free Report) and Global Payments Inc. (GPN - Free Report) have lost 15%, 27.2% and 1.1%, respectively, in the same time frame. While Oaktree Specialty and Global Payments presently carry a Zacks Rank #3 (Hold), Jefferies Financial currently has a Zacks Rank #2 (Buy).

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