Virtu Financial, Inc.
VIRT
has been gaining from its strong segmental performances and market volatility for a while. VIRT is also thriving on the back of operational excellence.
This market-making firm offers its services in 36 countries and owns more than 30% market share for retail investor order flow. Virtu Financial witnessed tremendous volumes last year as it performs well amid market uncertainty.
VIRT’s trailing 12-month return on equity (ROE) reinforces its growth potential. Its ROE stands at 38.59%, higher than its industry’s average of 22.2%.
Virtu Financial benefits from advancements in technology, steady volumes and expanded product offerings.
Now let’s dig deeper to find out what makes it an investor favorite.
Given the market conditions, Virtu Financial continues to witness a solid revenue stream. Last year, VIRT reported revenues worth $3.24 billion, up 113% year over year.
Virtu Financial constantly benefits from its Investment Technology Group, Inc. buyout, completed in 2019. It helped VIRT win institutional clients. In around two years from the closure, the transaction contributed to growth in the Execution Services segment. In 2020, revenues from this segment grew 32.2% year over year on the back of commissions, workflow technology and analytics. We expect the segment to deliver solid performances going forward.
VIRT’s solvency position also remains a positive. Virtu Financial already paid down debt worth $289 million in 2020. Repayment of debt enabled VIRT to successfully reduce the same by 16.5% from the 2019-end level to $1.67 billion as of Dec 31, 2020. In the first nine months of 2021, long-term debt dipped 2.1% from the level at 2020 end. Virtu Financial has plans to use its free cash flow to decrease the term debt.
Owing to its financial strength, Virtu Financial deployed capital in the form of dividends for 23 straight quarters. The board members sanctioned an additional share buyback authorization of $750 million over the next couple of years. It even extended the duration of the same through May 4, 2022.
Its dividend yield stands at 3.45%, higher than the industry average of 1.7%. Robust cash flows should enable VIRT to maintain its dividend payment policy along with share repurchases. Its intelligent capital management strategy should instill investors’ confidence in the stock.
Although VIRT faced steep expenses over the last many quarters due to higher brokerage, exchange, clearance fees and payments for order flow, net, communication and data processing, employee compensation and payroll taxes, debt issue cost related to debt refinancing, prepayment and commitment fees, the same decreased 7.2% in the first nine months. We expect its expenses to continue decreasing going forward.
In addition, this miscellaneous financial service provider’s diversified business strengthens its position for the long haul.
Price Performance
Shares of this currently Zacks Rank #2 (Buy) player have gained 18.4% in the past year, outperforming its
industry
’s growth of 14.7%. You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Other Stocks to Consider
Some other top-ranked stocks in the same space are
Alerus Financial Corporation
ALRS
,
Houlihan Lokey, Inc
. (
HL
I) and
Guild Holdings Company
GHLD
.
Alerus Financial is a financial services company. ALRS’ earnings managed to beat estimates in three of its trailing four quarters (while missing the mark in one), the average beat being 23.58%.
Houlihan Lokey is an investment bank focusing on mergers and acquisitions, financings, financial restructurings and financial advisory services. HLI delivered a trailing four-quarter surprise of 39.53%, on average.
Guild Holdings Company provides financial services. GHLD’s bottom line managed to beat on earnings in three of its trailing four quarters (while missing the mark in one), the average beat being 57.31%.
While shares of Alerus Financial, Houlihan Lokey have gained 21.9% and 53.45% each , the stock of Guild Holdings has lost 4.1% in the past year.
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