Intercontinental Exchange (NYSE: ICE) and MarketAxess (NASDAQ:MKTX) are both mid-cap finance companies, but which is the superior business? We will compare the two businesses based on the strength of their valuation, earnings, institutional ownership, risk, dividends, analyst recommendations and profitability.

Dividends

Intercontinental Exchange pays an annual dividend of $0.80 per share and has a dividend yield of 1.1%. MarketAxess pays an annual dividend of $1.32 per share and has a dividend yield of 0.7%. Intercontinental Exchange pays out 29.1% of its earnings in the form of a dividend. MarketAxess pays out 33.9% 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. MarketAxess has raised its dividend for 3 consecutive years. Intercontinental Exchange is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a breakdown of current recommendations for Intercontinental Exchange and MarketAxess, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Intercontinental Exchange 0 2 6 0 2.75
MarketAxess 0 2 2 1 2.80

Intercontinental Exchange presently has a consensus target price of $72.38, indicating a potential upside of 0.42%. MarketAxess has a consensus target price of $192.40, indicating a potential downside of 1.51%. Given Intercontinental Exchange’s higher probable upside, equities research analysts plainly believe Intercontinental Exchange is more favorable than MarketAxess.

Profitability

This table compares Intercontinental Exchange and MarketAxess’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Intercontinental Exchange 27.91% 11.01% 2.18%
MarketAxess 37.67% 30.12% 27.26%

Volatility & Risk

Intercontinental Exchange has a beta of 0.73, indicating that its share price is 27% less volatile than the S&P 500. Comparatively, MarketAxess has a beta of 0.69, indicating that its share price is 31% less volatile than the S&P 500.

Valuation and Earnings

This table compares Intercontinental Exchange and MarketAxess’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Intercontinental Exchange $5.96 billion 7.08 $1.42 billion $2.75 26.21
MarketAxess $369.92 million 19.82 $126.17 million $3.89 50.22

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

Institutional and Insider Ownership

90.8% of Intercontinental Exchange shares are owned by institutional investors. Comparatively, 92.8% of MarketAxess shares are owned by institutional investors. 1.5% of Intercontinental Exchange shares are owned by insiders. Comparatively, 4.0% of MarketAxess shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Summary

MarketAxess beats Intercontinental Exchange on 11 of the 18 factors compared between the two stocks.

Intercontinental Exchange Company Profile

Intercontinental Exchange Inc, formerly IntercontinentalExchange Group, Inc., is a network of regulated exchanges and clearing houses for financial and commodity markets. The Company delivers transparent and accessible data, technology and risk management services to markets around the world through its portfolio of exchanges, including the New York Stock Exchange, ICE Futures, Liffe and Euronext. In February 2014, the Company completed the acquisition of Singapore Mercantile Exchange. In July 2014, Intercontinental Exchange Inc sold its Wombat Financial Software, a unit of NYSE Technologies. Effective September 10, 2014, Intercontinental Exchange Inc acquired an undisclosed majority interest in Holland Clearing House NV.

MarketAxess Company Profile

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.

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