MarketAxess (MKTX)

Electronic bond trading platform MarketAxess (NASDAQ:MKTX) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 1% year on year to $208.8 million. Its non-GAAP profit of $1.84 per share was 8.1% above analysts’ consensus estimates.

Company Overview

Pioneering the shift from phone-based to electronic bond trading since 2000, MarketAxess (NASDAQ:MKTX) operates electronic trading platforms that enable institutional investors and broker-dealers to efficiently trade fixed-income securities like corporate and government bonds.

Financial exchanges and data providers operate trading platforms and sell market information. They enjoy relatively stable revenue from trading fees and subscriptions, increasing demand for data analytics, and expansion opportunities in emerging markets. Challenges include regulatory oversight of market structure, competition from alternative trading venues, and substantial technology investments needed to maintain low-latency trading infrastructure and data security.

MarketAxess competes with Tradeweb (NASDAQ:TW) and Bloomberg in the electronic fixed-income trading space. Other competitors include Intercontinental Exchange (NYSE:ICE), Trumid, and CME Group (NASDAQ:CME) in various segments of the bond and rates markets.

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, MarketAxess’s revenue grew at a tepid 5.3% compounded annual growth rate over the last five years. This was below our standard for the financials sector and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. MarketAxess’s annualized revenue growth of 7% over the last two years is above its five-year trend, but we were still disappointed by the results. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, MarketAxess reported modest year-on-year revenue growth of 1% but beat Wall Street’s estimates by 0.7%.

Financial services companies rely heavily on the total number of transactions and loan originations to drive top-line growth. Understanding these volumes is essential for finding winners in the sector.

MarketAxess’s volumes have grown at an annual rate of 11.3% over the last five years, a step above the broader financials industry and faster than its total revenue. When analyzing MarketAxess’s volumes over the last two years, we can see that growth accelerated to 17.1% annually.

MarketAxess’s volumes punched in at $2.49 trillion this quarter, meeting analysts’ expectations. This print was 4.1% lower than the same quarter last year.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For Financial Exchanges & Data companies, we look at pre-tax profit rather than the operating margin that defines sectors such as consumer, tech, and industrials.

The pre-tax profit margin includes interest because it's central to how financial institutions generate revenue and manage costs. Tax considerations are excluded since they represent government policy rather than operational performance, giving investors a clearer view of business fundamentals.

Over the last four years, MarketAxess’s pre-tax profit margin has risen by 5.7 percentage points, going from 50% to 44.3%. Expenses have stabilized more recently as the company’s pre-tax profit margin was flat on a two-year basis.

In Q3, MarketAxess’s pre-tax profit margin was 44.8%. This result was in line with the same quarter last year.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

MarketAxess’s flat EPS over the last five years was below its 5.3% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded due to factors such as interest expenses and taxes.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For MarketAxess, its two-year annual EPS growth of 6.3% was higher than its five-year trend. Accelerating earnings growth is almost always an encouraging data point.

In Q3, MarketAxess reported adjusted EPS of $1.84, down from $1.90 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 8.1%. Over the next 12 months, Wall Street expects MarketAxess’s full-year EPS of $7.44 to grow 5.6%.

Return on equity, or ROE, tells us how much profit a company generates for each dollar of shareholder equity, a key funding source for banks. Over a long period, banks with high ROE tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, MarketAxess has averaged an ROE of 22.5%, exceptional for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This is a bright spot for MarketAxess.

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

MarketAxess currently has $66.87 million of debt and $1.38 billion of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 0.1×. We think this is safe and raises no red flags. In general, we’re comfortable with any ratio below 3.5× for a financials business.

It was good to see MarketAxess beat analysts’ EPS expectations this quarter on revenue that was slightly ahead of estimates. Overall, this print had some key positives. The stock traded up 2.5% to $169.92 immediately following the results.

Updated: December 4, 2025 at 11:38 PM EST

When considering an investment in MarketAxess, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

MarketAxess isn’t a terrible business, but it doesn’t pass our quality test. For starters, its revenue growth was uninspiring over the last five years. And while its stellar ROE suggests it has been a well-run company historically, the downside is its declining pre-tax profit margin shows the business has become less efficient. On top of that, its weak EPS growth over the last five years shows it’s failed to produce meaningful profits for shareholders.

MarketAxess’s P/E ratio based on the next 12 months is 20.3x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $200.90 on the company (compared to the current share price of $167.01).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.