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Long term investing can be life changing when you buy and hold the truly great businesses. And we’ve seen some truly amazing gains over the years. To wit, the MarketAxess Holdings Inc. (NASDAQ:MKTX) share price has soared 515% over five years. And this is just one example of the epic gains achieved by some long term investors. On top of that, the share price is up 47% in about a quarter.
Anyone who held for that rewarding ride would probably be keen to talk about it.
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over half a decade, MarketAxess Holdings managed to grow its earnings per share at 20% a year. This EPS growth is lower than the 44% average annual increase in the share price. So it’s fair to assume the market has a higher opinion of the business than it did five years ago. And that’s hardly shocking given the track record of growth. This optimism is visible in its fairly high P/E ratio of 69.74.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that MarketAxess Holdings has improved its bottom line lately, but is it going to grow revenue? Check if analysts think MarketAxess Holdings will grow revenue in the future.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for MarketAxess Holdings the TSR over the last 5 years was 542%, which is better than the share price return mentioned above. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It’s good to see that MarketAxess Holdings has rewarded shareholders with a total shareholder return of 57% in the last twelve months. And that does include the dividend. That’s better than the annualised return of 45% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. If you would like to research MarketAxess Holdings in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
Of course MarketAxess Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.