MarketAxess Holdings (NASDAQ: MKTX) and CME Group (NASDAQ:CME) are both mid-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitabiliy, dividends, institutional ownership, valuation, risk, analyst recommendations and earnings.

Earnings & Valuation

This table compares MarketAxess Holdings and CME Group’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
MarketAxess Holdings $385.24 million 18.99 $219.89 million $3.69 52.82
CME Group $3.59 billion 11.45 $2.45 billion $4.62 26.19

CME Group has higher revenue and earnings than MarketAxess Holdings. CME Group is trading at a lower price-to-earnings ratio than MarketAxess Holdings, indicating that it is currently the more affordable of the two stocks.

Dividends

MarketAxess Holdings pays an annual dividend of $1.32 per share and has a dividend yield of 0.7%. CME Group pays an annual dividend of $2.64 per share and has a dividend yield of 2.2%. MarketAxess Holdings pays out 35.8% of its earnings in the form of a dividend. CME Group pays out 57.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Analyst Ratings

This is a breakdown of current recommendations and price targets for MarketAxess Holdings and CME Group, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
MarketAxess Holdings 0 2 2 1 2.80
CME Group 0 3 4 0 2.57

MarketAxess Holdings presently has a consensus target price of $183.60, indicating a potential downside of 5.81%. CME Group has a consensus target price of $126.71, indicating a potential upside of 4.72%. Given CME Group’s higher possible upside, analysts clearly believe CME Group is more favorable than MarketAxess Holdings.

Profitability

This table compares MarketAxess Holdings and CME Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
MarketAxess Holdings 36.26% 30.39% 27.41%
CME Group 43.62% 7.43% 2.24%

Insider and Institutional Ownership

89.8% of MarketAxess Holdings shares are owned by institutional investors. Comparatively, 83.1% of CME Group shares are owned by institutional investors. 4.5% of MarketAxess Holdings shares are owned by company insiders. Comparatively, 0.6% of CME Group shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Volatility and Risk

MarketAxess Holdings has a beta of 0.7, meaning that its share price is 30% less volatile than the S&P 500. Comparatively, CME Group has a beta of 0.74, meaning that its share price is 26% less volatile than the S&P 500.

Summary

MarketAxess Holdings beats CME Group on 9 of the 17 factors compared between the two stocks.

About MarketAxess Holdings

MarketAxess Holdings Inc. operates an electronic trading platform that enables fixed-income market participants to trade corporate bonds and other types of fixed-income instruments using its trading technology. Institutional investor and broker-dealer firms are users of trading platform, accessing global liquidity in the United States corporate bonds, emerging markets and high-yield bonds, European bonds, the United States agency bonds, municipal bonds, credit default swaps and other fixed-income securities. Through Open Trading protocols, it executes trades in certain bonds between and among institutional investor and broker-dealer clients in a trading environment on a matched principal basis. It offers trading-related products and services, including market data to assist clients with trading decisions; connectivity solutions that facilitate straight-through processing; technology services to optimize trading environments, and execution services for exchange-traded fund managers.

About CME Group

CME Group Inc., through its exchanges, provides products across all asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural products and metals. The Company’s segment primarily consists of the Chicago Mercantile Exchange Inc. (CME), Board of Trade of the City of Chicago, Inc. (CBOT), New York Mercantile Exchange, Inc. (NYMEX) and Commodity Exchange, Inc. (COMEX) exchanges. The Company provides electronic trading around the globe on its CME Globex platform. The Company also offers clearing and settlement services across asset classes for exchange-traded and over-the-counter derivatives through its clearinghouses CME Clearing and CME Clearing Europe. It also provides hosting, connectivity and customer support for electronic trading through its co-location services. The Company’s CME Direct platform offers side-by-side trading of exchange-listed and privately negotiated markets.

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