MarketAxess Holdings (MKTX) Jumped 40% In Three Months, Is It Still Undervalued?

MarketAxess Holdings (MKTX) has drawn attention after a strong past 3 months, with the share price up about 40% and the one year total return still showing a decline.

For MarketAxess Holdings, the recent 40.3% 90-day share price return contrasts with a one-year total shareholder return that is still down 9.9%. This suggests that momentum has improved in the short term, while longer-term holders remain under water.

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After a 40% three month surge, MarketAxess Holdings now trades slightly above the average analyst target while still screening at an 18% discount to one intrinsic value estimate. Which reference point is closer to fair value?

Most Popular Narrative: 3.3% Overvalued

MarketAxess Holdings closed at $163.26 against a widely followed fair value estimate of $158.00, which puts the stock slightly above that narrative anchor while still leaving room to debate what really drives that number.

The analysts have a consensus price target of $158.0 for MarketAxess Holdings based on their expectations of its future earnings growth, profit margins and other risk factors.

In order for you to agree with the analysts, you would need to believe that by 2029, revenues will be $1.0 billion, earnings will come to $330.2 million, and it would be trading on a PE ratio of 18.0x, assuming you use a discount rate of 7.9%.

Read the complete narrative.

Curious what sits underneath that fair value cut and the takeover focus? The narrative leans on tempered revenue growth, slimmer margins and a lower future earnings multiple. The exact mix of those inputs is what really moves the model.

Result: Fair Value of $158 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

Still, the MarketAxess Holdings story can shift quickly if electronic adoption in key credit segments stalls, or if fee pressure from rivals squeezes pricing power faster than expected.

Find out about the key risks to this MarketAxess Holdings narrative.

Another View: MarketAxess Holdings Through A Cash Flow Lens

The first narrative pegs MarketAxess Holdings at 3.3% above a $158 fair value anchor, yet our DCF model paints a different picture. On that approach, MKTX at $163.26 trades about 17.6% below an estimated $198.21 cash flow value. Which signal would you treat as more important?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out MarketAxess Holdings for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 31 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Sentiment around MarketAxess Holdings is split, which is exactly why it helps to test the numbers yourself and pressure test each scenario. If you want a quick way to see what the market is optimistic about right now, start with the 4 key rewards.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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