Over the past six months, MarketAxess’s shares (currently trading at $162.70) have posted a disappointing 15.3% loss, well below the S&P 500’s 12.3% gain. This may have investors wondering how to approach the situation.
Is there a buying opportunity in MarketAxess, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think MarketAxess Will Underperform?
Even with the cheaper entry price, we don’t have much confidence in MarketAxess. Here are two reasons we avoid MKTX, plus one stock we’d rather own.
1. Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years.
Unfortunately, MarketAxess’s 4.2% annualized revenue growth over the last five years was sluggish. This fell short of our benchmark for the financials sector.
2. EPS Growth Has Stalled
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
MarketAxess’s flat EPS over the last five years was below its 4.2% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
MarketAxess doesn’t pass our quality test. After the recent drawdown, the stock trades at 19.5× forward P/E (or $162.70 per share). This multiple tells us a lot of good news is priced in - you can find more timely opportunities elsewhere. Let us point you toward our favorite semiconductor picks and shovels play.
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