MarketAxess Holdings Inc (MKTX, Financial) recently posted a daily gain of 2.85%, despite a 3-month loss of -10.04%. The company's Earnings Per Share (EPS) stands at 6.71. This analysis aims to determine whether the stock is significantly undervalued, as suggested by its current market performance and financial metrics. Read on to gain a comprehensive understanding of MarketAxess Holdings' valuation.
A Brief Overview of MarketAxess Holdings Inc (MKTX, Financial)
Founded in 2000, MarketAxess Holdings is a leading electronic fixed-income trading platform connecting broker/dealers and institutional investors. Primarily focused on credit-based fixed-income securities, the company has recently expanded into Treasuries and municipal bonds. It also provides pre- and post-trade services. Despite a current share price of $245.64, the GF Value, an estimation of fair value, stands at $402.36, suggesting that the stock may be significantly undervalued.
Understanding the GF Value of MarketAxess Holdings
The GF Value is a proprietary measure of a stock's intrinsic value, computed considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
MarketAxess Holdings' stock appears to be significantly undervalued according to the GF Value. This suggests that the long-term return of its stock is likely to be much higher than its business growth.
Financial Strength of MarketAxess Holdings
Investing in companies with poor financial strength carries a higher risk of permanent capital loss. Therefore, it's crucial to review the financial strength of a company before deciding to buy its stock. MarketAxess Holdings, with a cash-to-debt ratio of 5.21, ranks better than 58.81% of 755 companies in the Capital Markets industry. This strong financial performance is reflected in its overall financial strength rank of 9 out of 10.
Profitability and Growth of MarketAxess Holdings
Investing in profitable companies, especially those demonstrating consistent profitability over the long term, poses less risk. MarketAxess Holdings, with a operating margin of 44.35%, ranks better than 80.94% of 640 companies in the Capital Markets industry. Its growth, however, ranks worse than 50.75% of 465 companies in the industry.
ROIC vs WACC Comparison of MarketAxess Holdings
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) is an effective way to evaluate its profitability. Over the past 12 months, MarketAxess Holdings' ROIC was 31.56 while its WACC came in at 10.12, suggesting the company is creating value for its shareholders.
Conclusion
Based on our analysis, MarketAxess Holdings (MKTX, Financial) stock appears to be significantly undervalued. The company's strong financial condition and high profitability, despite its lower growth rank, make it an attractive investment. For more information about MarketAxess Holdings stock, check out its 30-Year Financials here.
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