Shares of MarketAxess Holdings Inc. MKTX have gained 17.2% in the past six months compared with the industry’s 11.3% growth. The Finance sector and the S&P 500 composite index rose 10.8% and 9.5%, respectively, in the same time frame. With a market capitalization of $9.7 billion, the average volume of shares traded in the past three months was 0.4 million.

MarketAxess benefits from increased trading volumes, market share gains across a diversified set of product categories, strategic partnerships and a strong financial position for technology investments.

The leading electronic trading platform operator, presently carrying a Zacks Rank #3 (Hold), has a decent track record of beating estimates in three of the trailing four quarters and missing the mark once, the average surprise being 2.63%.

Return on equity in the trailing 12 months is currently 20.4%, which is higher than the industry’s average of 13.2%. This substantiates the company’s efficiency in utilizing shareholders’ funds.

Image Source: Zacks Investment Research

Can MKTX Retain the Momentum?

The Zacks Consensus Estimate for 2024 earnings is pegged at $7.06 per share, which implies a 3.1% increase from the prior-year figure. The consensus mark for revenues is $812.5 million, which indicates an improvement of 8% from the prior-year figure.

The Zacks Consensus Estimate for 2025 earnings is pegged at $7.96 per share, which indicates a 12.8% increase from the 2024 estimate. The consensus mark for revenues is $907.6 million, implying 11.7% growth from the 2024 estimate. 

MarketAxess’ revenue growth has been driven by increased trading volumes across most of its credit product categories. This has led to a rise in commissions, which constitute a major portion of its overall revenue. It accounted for 87.4% of MKTX's revenues in the first half of 2024. The boost in trading volumes has been fueled by accelerated market share gains and a diversified product suite that includes U.S. High Grade, Eurobond, Emerging Markets and Municipal Bonds. In the first half of 2024, MKTX reported a credit trading volume of $1.8 trillion, marking an 11% increase from that reported in the correspending period of 2023.

MarketAxess actively pursues acquisitions and partnerships to enhance the capabilities of its trading platform, enter new markets, launch new products and services and expand its presence in fixed-income markets. In September 2024, MKTX announced an extension of its 10-year-long partnership with BlackRock in a bid to integrate its credit trading protocols within the Aladdin platform. The extension of this tie-up bodes well as it enhances existing offerings for common clients of both companies. 

The Open Trading platform of MarketAxess has created a global and diverse liquidity pool, allowing institutional investor clients, dealer clients and alternative liquidity providers to interact without revealing their identities. This platform offers significant price improvements for clients and attracts new trading counterparties. 

Maintaining and upgrading its electronic trading platform requires ongoing technology investments, which in turn necessitate strong financial resources. MarketAxess’ sound cash reserves and robust cash generation capabilities underscore its financial strength. The company also remains committed to returning capital to shareholders through share buybacks and dividend payments.