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

Institutional and Insider Ownership

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

Analyst Ratings

This is a summary of recent ratings and price targets for MarketAxess and Intercontinental Exchange, as provided by MarketBeat.

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

MarketAxess currently has a consensus target price of $192.40, suggesting a potential downside of 1.84%. Intercontinental Exchange has a consensus target price of $72.38, suggesting a potential upside of 2.04%. Given Intercontinental Exchange’s higher possible upside, analysts plainly believe Intercontinental Exchange is more favorable than MarketAxess.

Volatility and Risk

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

Earnings and Valuation

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
MarketAxess $369.92 million 19.89 $126.17 million $3.89 50.39
Intercontinental Exchange $5.96 billion 6.96 $1.42 billion $2.75 25.79

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.

Profitability

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

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

Dividends

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

Summary

MarketAxess beats Intercontinental Exchange on 10 of the 18 factors compared between the two stocks.

About MarketAxess

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 Intercontinental Exchange

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.

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