Over the past six months, MarketAxess’s shares (currently trading at $188.98) have posted a disappointing 11.1% loss, well below the S&P 500’s 15.5% gain. 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? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think MarketAxess Will Underperform?
Despite the more favorable entry price, we don't have much confidence in MarketAxess. Here are two reasons we avoid MKTX and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.
Unfortunately, MarketAxess’s 6.4% annualized revenue growth over the last five years was mediocre. This was below our standard for the financials sector.
2. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for MarketAxess, its EPS declined by 2.7% annually over the last five years while its revenue grew by 6.4%. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
MarketAxess falls short of our quality standards. After the recent drawdown, the stock trades at 23.6× forward P/E (or $188.98 per share). This valuation tells us a lot of optimism is priced in - we think other companies feature superior fundamentals at the moment. We’d recommend looking at a dominant Aerospace business that has perfected its M&A strategy.
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