Analyzing CBOE Holdings (CBOE) and MarketAxess Holdings (MKTX)

CBOE Holdings (NASDAQ: CBOE) and MarketAxess Holdings (NASDAQ:MKTX) are both mid-cap finance companies, but which is the better business? We will contrast the two companies based on the strength of their institutional ownership, dividends, valuation, earnings, risk, analyst recommendations and profitability.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for CBOE Holdings and MarketAxess Holdings, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
CBOE Holdings 1 5 8 0 2.50
MarketAxess Holdings 0 2 2 1 2.80

CBOE Holdings currently has a consensus price target of $75.61, suggesting a potential downside of 21.49%. MarketAxess Holdings has a consensus price target of $192.40, suggesting a potential upside of 1.96%. Given MarketAxess Holdings’ stronger consensus rating and higher probable upside, analysts plainly believe MarketAxess Holdings is more favorable than CBOE Holdings.

Dividends

CBOE Holdings pays an annual dividend of $1.00 per share and has a dividend yield of 1.0%. MarketAxess Holdings pays an annual dividend of $1.32 per share and has a dividend yield of 0.7%. CBOE Holdings pays out 55.2% of its earnings in the form of a dividend. MarketAxess Holdings pays out 34.6% 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.

Profitability

This table compares CBOE Holdings and MarketAxess Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
CBOE Holdings 17.81% 17.45% 9.24%
MarketAxess Holdings 37.46% 30.38% 27.43%

Valuation & Earnings

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

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
CBOE Holdings $1.31 billion 8.29 $473.86 million $1.81 53.20
MarketAxess Holdings $385.91 million 18.36 $219.16 million $3.81 49.53

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

Institutional and Insider Ownership

79.7% of CBOE Holdings shares are owned by institutional investors. Comparatively, 90.4% of MarketAxess Holdings shares are owned by institutional investors. 1.0% of CBOE Holdings shares are owned by insiders. Comparatively, 4.5% of MarketAxess Holdings shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Volatility & Risk

CBOE Holdings has a beta of 0.49, meaning that its share price is 51% less volatile than the S&P 500. Comparatively, MarketAxess Holdings has a beta of 0.69, meaning that its share price is 31% less volatile than the S&P 500.

Summary

MarketAxess Holdings beats CBOE Holdings on 12 of the 17 factors compared between the two stocks.

CBOE Holdings Company Profile

CBOE Holdings, Inc. is a holding company. The Company’s principal business is operating markets that offer for trading options on various market indexes (index options), on an exclusive basis, and futures contracts, as well as on non-exclusive multiply listed options, such as options on the stocks of individual corporations (equity options), and options on other exchange-traded products (ETP options), such as exchange-traded funds (ETF options) and exchange-traded notes (ETN options). The Company’s subsidiaries include Chicago Board Options Exchange, Incorporated (CBOE), CBOE Futures Exchange, LLC (CFE), C2 Options Exchange, Incorporated (C2), Market Data Express, LLC and Chicago Options Exchange Building Corporation. The Company operates CBOE, CFE and C2 as stand-alone exchanges. The options contracts listed for trading include options on indexes, equities and ETPs. In addition, the Company provides a marketplace for trading futures contracts through CFE.

MarketAxess Holdings 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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