MarketAxess Holdings Inc (MKTX, Financial) recently posted a 3.95% daily gain, contrasting its 3-month loss of 20.8%. With an Earnings Per Share (EPS) of 6.59, we delve into the question: Is the stock significantly undervalued? This article presents a comprehensive valuation analysis of MKTX, encouraging readers to explore the financial health, growth prospects, and intrinsic value of the company.
Company Introduction
Founded in 2000, MarketAxess Holdings is a leading electronic fixed-income trading platform that connects broker/dealers and institutional investors. The company is primarily focused on credit-based fixed income securities. Its main trading products are U.S. investment-grade and high-yield bonds, Eurobonds, and Emerging Market corporate debt. In recent years, the company has expanded more aggressively into Treasuries and municipal bonds. The company also provides pre- and post-trade services. Despite its current stock price of $214.15, the GF Value estimates its fair value at $366.95.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical multiples, a GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of business performance. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Based on the GF Value, MarketAxess Holdings (MKTX, Financial) appears to be significantly undervalued. Given this, the long-term return of its stock is likely to be much higher than its business growth.
Financial Strength
Investing in companies with strong financial strength reduces the risk of permanent loss. MarketAxess Holdings has a cash-to-debt ratio of 5.55, which is better than 59.89% of 758 companies in the Capital Markets industry. The overall financial strength of MarketAxess Holdings is 9 out of 10, indicating a strong financial position.
Profitability and Growth
Companies with consistent profitability over the long term offer less risk for investors. MarketAxess Holdings has been profitable 10 over the past 10 years. Its operating margin is 43.05%, which ranks better than 80.28% of 649 companies in the Capital Markets industry. Overall, the profitability of MarketAxess Holdings is ranked 10 out of 10, indicating strong profitability.
Company growth is a critical factor in valuation. The 3-year average annual revenue growth of MarketAxess Holdings is 12.3%, which ranks better than 60.79% of 681 companies in the Capital Markets industry. However, the 3-year average EBITDA growth rate is 12.2%, which ranks worse than 50.32% of 473 companies in the Capital Markets industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) can indicate its profitability. MarketAxess Holdings's ROIC is 28.73, and its WACC is 10.74, implying the company is creating value for shareholders.
Conclusion
In summary, MarketAxess Holdings (MKTX, Financial) appears to be significantly undervalued. The company's financial condition is strong, and its profitability is robust. However, its growth ranks worse than 50.32% of 473 companies in the Capital Markets industry. To learn more about MarketAxess Holdings stock, you can check out its 30-Year Financials here.
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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.
