Earnings estimates have been rising for MarketAccess Holdings Inc. (MKTX) as the company has put together three consecutive positive earnings surprises.
Its latest earnings beat came in the fourth quarter in which commission revenue jumped 12.9% due to higher trading volume in high-grade corporate bonds. The company was also able to leverage its fixed expenses which led to a significant increase in its net profit margin.
The company also recently raised its quarterly dividend by 29%. It yields 1.6%.
Company Description
MarketAccess Holdings Inc. operates an electronic trading platform for U.S. and European high-grade corporate bonds, emerging markets bonds and other types of fixed-income securities. The company is headquartered in New York and has a market cap of $828 million.
Fourth Quarter Results
MarketAccess recently posted its results for the fourth quarter. Earnings per share came in at 23 cents, which beat the Zacks Consensus Estimate by 3 cents. It was a 35% increase over the same quarter in 2009.
Commission revenue was up 12.9% year-over-year on higher trading volume. Overall, total revenue was up 13.7%.
Income before taxes surged 30.9% as the company was able to leverage its fixed expenses. Employee compensation and benefits fell from 40.6% of total revenue to 36.3%, for instance.
Outlook
Estimates have been soaring over the last several months as MarketAccess has strung together three positive earnings surprises:
The Zacks Consensus Estimate for 2011 is $0.96, or 20% higher than 2010 EPS. The 2012 consensus estimate is currently $1.05, representing 9% growth over 2011 EPS.
It is a Zacks #2 Rank (Buy) stock.
Dividend
MarketAccess began paying a regular quarterly dividend of 7 cents per share in late 2009. It raised it to 9 cents in February 2011.
It currently yields 1.6%.
The stock has soared more than 66% since late July 2010. As a results, valuation has increased a bit, but not alarmingly so.
Shares trade at 23.1x forward earnings, a premium to the industry average of 11.9x. Its PEG ratio is a reasonable 1.5 however.
Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.
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