MarketAxess Holdings Inc (MKTX, Financial) recently experienced a daily loss of -1.73%, contributing to a 3-month decline of -5.48%. Despite these fluctuations, the company maintains an Earnings Per Share (EPS) of 6.59. Investors often grapple with the question of whether such a stock is significantly undervalued. To shed light on this, we delve into a valuation analysis, inviting readers to explore the intricacies of MarketAxess Holdings' financials and market position.
Company Introduction
Founded in 2000, MarketAxess Holdings Inc (MKTX, Financial) is a trailblazer in the electronic fixed-income trading platform sector, connecting broker/dealers with institutional investors. Specializing in credit-based fixed income securities, the company's primary trading products include U.S. investment-grade and high-yield bonds, Eurobonds, and Emerging Market corporate debt. The strategic acquisitions of LiquidityEdge and MuniBrokers have allowed MarketAxess Holdings to expand into Treasuries and municipal bonds. Additionally, with the acquisition of Regulatory Reporting Hub from Deutsche Börse Group, it has enhanced its pre- and post-trade service offerings. Comparing MarketAxess Holdings' stock price of $222.94 to its GF Value of $365.37, we initiate a comprehensive examination of its true market value.
Summarize GF Value
The GF Value is a unique metric, representing the intrinsic value of a stock based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides a visual representation of a stock's fair trading value. MarketAxess Holdings (MKTX, Financial) appears to be significantly undervalued according to this measure. With the stock trading at $222.94 per share, it is well below the GF Value, suggesting a potential for higher future returns relative to its business growth.
Financial Strength
Understanding a company's financial strength is vital to avoid the risk of permanent capital loss. MarketAxess Holdings boasts a cash-to-debt ratio of 5.55, ranking higher than 59.58% of its peers in the Capital Markets industry. With an overall financial strength rating of 9 out of 10, MarketAxess Holdings' fiscal health is robust, which is an encouraging sign for investors.
Profitability and Growth
MarketAxess Holdings' profitability is a testament to its less risky investment profile, having been profitable for the last 10 years. With a 12-month revenue of $733.20 million and an Earnings Per Share (EPS) of $6.59, the company's operating margin stands impressively at 43.05%, surpassing 78.89% of its industry counterparts. Furthermore, the company's growth prospects are also commendable, with a 3-year average annual revenue growth rate of 12.3%, ranking favorably within the industry.
ROIC vs WACC
An insightful way to assess MarketAxess Holdings' profitability is by comparing its Return on Invested Capital (ROIC) against its Weighted Average Cost of Capital (WACC). A higher ROIC compared to WACC indicates value creation for shareholders. MarketAxess Holdings' ROIC over the past 12 months has been a robust 28.73, significantly outpacing its WACC of 11.14.
Conclusion
In summary, MarketAxess Holdings (MKTX, Financial) presents a compelling case of being significantly undervalued. The company's financial condition is strong, and its profitability is robust. Although its growth ranks below some industry peers, the potential for higher future returns is evident. To gain a deeper understanding of MarketAxess Holdings' financials, interested investors can explore its 30-Year Financials here.
To discover high-quality companies that may deliver above-average returns, please check out the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
