MarketAxess Rides on Growth in Electronic Trading Network

MarketAxess Holdings Inc. MKTX comprises a leading electronic trading network for the institutional market of U.S. credit products. The company is poised for long-term growth considering that the large fixed income market is undergoing a major structural shift owing to regulatory and market trends.

The company’s pervasive presence will allow it to grab a considerable share in the underpenetrated electronic trading market which is growing but still in early stages of evolution.

MarketAxess’ long-term results reflect its consistency in performance, witnessing a five-year (2014-2019) CAGR of 14% in terms of revenues and a 22% growth rate on the EPS front.

The company’s growth strategy focuses on ramping up efforts to tap the new and existing  markets, promoting open trading protocols and continuous investment in international business expansion. The company’s success in strengthening its global network of institutional customers created a diverse space for trading revenues.

As of fourth quarter-2019 end, MarketAxess’s expanding global client network consists of more than 1700 active firms, up 12% year over year. The company perceives a long-term growth opportunity in CEEMEA, Asia and Latin America markets.

One major achievement has been the company’s acquisition of LiquidityEdge in November 2019 that provided it with an attractive entry point in the U.S. Treasury bond market.

Also, the company’s investment in trading automation is adding an important trading efficiency to both dealers and investors. Open Trading continues to offer a significant stimulus to market liquidity and is also reducing transaction costs.

Another strategic initiative taken by the company is the launch of live markets. Last October, the company launched Live Markets with a pilot group of investor and dealer clients. It is getting a good response from this new protocol. This coupled with the growing adoption of automated trading strategies underscores the need for a protocol that offers live order-driven liquidity for both investors and dealers. The service will go fully live in early second-quarter 2020.

In the current year, MarketAxess will continue with its investment program in other new initiatives including portfolio trading solutions, treasury net hedging, live markets, munis, automated trading enhancements and the recently-announced Green Bond trading project.

We believe MarketAxess is poised to gain from the electronification of corporate bond trading. The company’s' unique liquidity, all-to-all Open Trading platform, allows it to benefit from network effects.

Even though year to date, the stock has lost 12.3%, it fared much better than its industry’s decline of 29.4%. The stock’s comparative outperformance buoys investors’ confidence in the company, which carries a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The stock has witnessed a 2.3% upward revision in 2020 Zacks Consensus Estimate for earnings over the past 30 days.

Other stocks carrying the same Zacks Rank as MarketAxess are Cboe Global Markets, Inc. CBOE, Intercontinental Exchange Inc. ICE and Nasdaq, Inc. NDAQ.

Earnings of both Cboe Global and Nasdaq surpassed estimates in all the last four quarters, the average positive surprise being 9.49% and 3.33% each. The bottom-line results of Intercontinental Exchange beat estimates in three of the trailing four quarters, matching the same in one, with a positive surprise of 4.28%, on average.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.

This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.

See their latest picks free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Cboe Global Markets, Inc. (CBOE) : Free Stock Analysis Report
 
Intercontinental Exchange Inc. (ICE) : Free Stock Analysis Report
 
Nasdaq, Inc. (NDAQ) : Free Stock Analysis Report
 
MarketAxess Holdings Inc. (MKTX) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.