Bull of the Day: Tradeweb Markets (TW)

Tradeweb Markets TW, a Zacks Rank #1 (Strong Buy), is a global operator of electronic trading marketplaces. The stock recently eclipsed its former all-time high and has been benefitting from a resurgence in the financial sector. Shares have widely outperformed the market over the past year, and the trend looks set to continue in 2024. TW stock is displaying relative strength as buying pressure accumulates in this market leader.

The company is part of the Zacks Financial – Investment Bank industry group, which currently ranks in the top 12% out of more than 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform the market over the next 3 to 6 months. This industry is also showing several favorable characteristics:

Zacks Investment Research
Image Source: Zacks Investment Research

Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.

Company Description

Tradeweb Markets builds and operates global electronic marketplaces. These marketplaces facilitate trading in a range of asset classes including equities, rates, credit, and money markets. Tradeweb offers pre-trade and post-trade data and analytics, trade execution and processing, as well as reporting services.

The company also provides a range of electronic, voice, and hybrid platforms to dealers and financial institutions via the Dealerweb platform. In addition, Tradeweb offers trading solutions for financial advisory firms and traders with its Tradeweb Direct platform.

Serving institutional, wholesale, and retail clients, Tradeweb boasts a wide array of customers including asset managers, hedge funds, central banks, proprietary trading firms, insurance companies, and brokerage firms.

Earnings Trends and Future Estimates

Tradeweb Markets has established an impressive earnings history, surpassing earnings estimates in each of the last four quarters. Earlier this month, the New York-based company reported fourth-quarter earnings of $0.64/share, a 1.59% surprise over the $0.63/share consensus estimate. Earnings improved 30.6% year-over-year, while revenues jumped 26.3% from the year-ago quarter.

The electronic marketplace facilitator has delivered a trailing four-quarter average earnings surprise of 1.4%. Consistently beating earnings estimates is a recipe for success.

Analysts covering TW are in agreement and have been raising their earnings estimates across the board. For the current quarter, analysts have bumped up earnings estimates by 6.35% in the past 60 days. The Q1 Zacks Consensus EPS Estimate now stands at $0.67/share, reflecting potential growth of 24.1% relative to the prior year. Revenues are projected to climb 19.9% to $394.8 million. 

Zacks Investment Research
Image Source: Zacks Investment Research

Let’s Get Technical

TW shares have advanced more than 42% over the last year. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.

StockCharts
Image Source: StockCharts

Notice how both the 50-day (blue line) and 200-day (red line) moving averages are sloping up. The stock has been making a series of 52-week highs and recently surpassed its former all-time high. With both strong fundamental and technical indicators, TW is poised to continue its outperformance.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Tradeweb Markets has recently witnessed positive revisions. As long as this trend remains intact (and TW continues to deliver earnings beats), the stock will likely continue its bullish run this year.

Bottom Line

The future looks bright for this highly-ranked, leading stock. The company has shown an ability to adapt to the ever-changing technological landscape, which puts it in a strong position moving forward.

Backed by a leading industry group and impressive history of earnings beats, it’s not difficult to see why TW stock is a compelling investment. An appealing technical trend along with robust fundamentals paint a bullish picture for Tradeweb Markets.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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