MarketAxess’s stock price has taken a beating over the past six months, shedding 26.6% of its value and falling to $161.19 per share. This may have investors wondering how to approach the situation.
Is now the time to buy MarketAxess, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free for active Edge members.
Why Is MarketAxess Not Exciting?
Despite the more favorable entry price, we're sitting this one out for now. Here are two reasons we avoid MKTX and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.
Regrettably, MarketAxess’s revenue grew at a tepid 5.3% compounded annual growth rate over the last five years. This was below our standard for the financials sector.
2. EPS Growth Has Stalled
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
MarketAxess’s flat EPS over the last five years was below its 5.3% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
MarketAxess isn’t a terrible business, but it doesn’t pass our bar. Following the recent decline, the stock trades at 21.2× forward P/E (or $161.19 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think other companies feature superior fundamentals at the moment. Let us point you toward one of our all-time favorite software stocks.
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