Bond Trading Boosts Marketaxess

03/10/2015 8:00 am EST


Leo Fasciocco

Investment Columnist and Publisher, Ticker Tape Digest

Our latest featured breakout stock is a company that operates electronic trading platforms for bonds and other types of fixed-income securities, notes Leo Fasciocco, editor of Ticker Tape Digest.

With annual revenues of $262 million, Marketaxess Holdings (MKTX) provides active institutional investor clients access to the liquidity provided by broker-dealer clients.

The trading platform allows institutional investor clients to simultaneously request competitive, executable bids or offers from multiple broker-dealers and to execute trades with the broker-dealer of their choice.

The company offers clients ability to trade US high-grade corporate bonds, European high-grade corporate bonds, credit default swaps, high-yield and emerging markets bonds. The firm also provides data and analytical tools.

Net for the upcoming first quarter should climb 23% to 56 cents a share from 46 cents a year before. The highest estimate on the Street is at 57 cents a share.

We see chances for an upside earnings surprise. The company topped the consensus estimate two out of the past three quarters recently.

Going out to 2016, the Street looks for a 19% gain in profits to $2.84 a share from the anticipated $2.38 this year.

Institutional sponsorship is excellent. The largest fund buyer recently was the 5-star rated Lord Abbett Developing Growth A Fund, which purchased 457,955 shares. Also, the 5-star rated Primecap Odyssey Aggressive Growth Fund was a recent buyer of 177,252 shares.

Over the last 12 months, MKTX has risen 31% versus a 12% gain for the S&P 500 index. Technically, the stock has broken out of a five-week flat base and hit a new high, which could draw in more buying. The new high could draw in more buying on Thursday.

This year, analysts are forecasting a 21% jump in earnings to $2.38 a share from $1.97 a year ago. The stock sells with a price-earnings ratio of 34. That is high. So, the stock is best suited for aggressive investors.

We are targeting MKTX for a move to $100 off this breakout. A protective stop can be placed near $79.

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