MarketAxess (MKTX) Grows On Inorganic & Organic Initiatives

On Sep 15, we issued an updated research report on MarketAxess Holdings, Inc. (NASDAQ:MKTX) . MarketAxess is the leading electronic trading network for the institutional market in U.S. credit products.

MarketAxess offers a widely diversified product portfolio to over 1,000 active institutional investor and dealer firms. As a result of its consistently growing client base and product profile, the company has grown revenues at CAGR of 17% from 2010–2015. Operating income and EBIDTA has also grown at 23% and 24% respectively over the same time frame.

MarketAxess’ growth strategy focuses on increasing market share for existing credit products, promoting open trading protocols and growing the European trading, data and post trade business.

Talking about the inorganic initiatives, the Xtrakter acquisition in Feb 2013 has not only expanded the company’s technology solutions’ suite but is also expected to guard its operations from the upcoming transparent trading mandates from the Markets in Financial Instruments Directive II (MIFID II) in Europe.

Alongside, the strategic alliance with BlackRock Inc (NYSE:BLK). in Apr 2013 led to the creation of a unified, Open Trading solution to help reduce liquidity fragmentation and improve pricing across the U.S. cash credit markets. This was further expanded to the European cash credit markets in Jan 2015. The strategic sale of Greenline Financial Technologies Inc. in Oct 2013 was also beneficial for MarketAxess’ core operations.

MarketAxess’ European trading business remains on its growth trajectory with a 100% year-over-year increase in trading volumes from European clients during the second quarter of 2016. The company is gaining Eurobond market share, and is seeing healthy growth in trading volumes in emerging markets and U.S. credit products from European clients.

MarketAxess boasts a superior financial model with strong cash flow and significant operating leverage, which enables superior capital management by way of share buyback and dividend payments.

Nevertheless, the company faces intense competition from players like CBOE Holdings, Inc. (NASDAQ:CBOE) , The Nasdaq OMX Group, Inc. (NASDAQ:NDAQ) and CME Group Inc. (NASDAQ:CME) . Moreover, it has to deal with stringent regulations in the U.S. and Europe.

MarketAxess carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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