There is a lot of buzz about fintech stocks, and these days, it's mostly not good. But there is a fintech that has flown under the radar for years despite posting consistently strong results. The company is called Tradeweb Markets (TW 0.08%) and it is one of the earliest fintechs, having been around since 1996.
Tradeweb is an electronic trading platform for fixed income, derivatives, money markets, exchange-traded funds (ETFs), and equities, among others, for institutional, wholesale, and retail traders. It is one of the biggest players in its sector and has been gaining market share. Here's why this long-established but little-known fintech is a growth stock to consider.
Consistent revenue growth
Tradeweb Markets was among the earliest fintechs when it opened in 1996, introducing a platform to modernize trading in U.S. Treasuries. Since then, it has expanded into one of the largest fixed-income trading marketplaces in the country, particularly for Treasuries.
In 2022, Tradeweb had its 23rd straight year of annual revenue growth, with record activity in U.S. high-grade and high-yield debt, as well as emerging market interest rate swaps. It also had strong growth in other areas, such as money markets, exchange-traded funds, and credit derivatives. That momentum continued into 2023, as the company posted $329 million in revenue, up 6% from the first quarter of 2022.
The company had record average daily volume (ADV) on its platform of $1.4 trillion in the first quarter, up 16% from the first quarter of last year. Overall, net income was up 5% year over year to $102 million in the quarter.
Excellent returns have followed, as the stock has posted an average annual return of 18.4% since it went public in April 2019. Last year, it was down 34% in a year when the technology sector struggled, but the stock is up about 9% year to date in 2023, and over the past year it is up about 8%.
In 2022, Tradeweb's share of fully electronic TRACE volume for U.S. high grade was 14.4% -- a record, up from a 13.4% share a year ago. TRACE stands for the Financial Industry Regulatory Authority's (FINRA) Trade Reporting and Compliance Engine.
And over the last six years, it has increased its market share of U.S. Treasury trading from 9.4% in 2017 to 19.7% at the end of 2022. Further, its growth in ADV trading in rates, credits, equities, and money markets over the past 10 years has outpaced the overall market growth in each of those areas.
More opportunities ahead
Tradeweb Markets has been a great growth story up until now, but can it continue to have long-term success? Given its strong momentum, effective management, and its commitment to growth, it looks well positioned to do so.
Just last month, the company announced it is in advanced discussions to buy Yieldbroker, a leading Australian government bond and interest-rate derivatives trading platform, in an all-cash deal. This will expand its footprint in the growing Asia-Pacific region.
Late last year it struck a multiyear deal with the world's largest asset manager, BlackRock, to integrate its trading platform into BlackRock's Aladdin order execution management system. This will further expand its reach through the Aladdin network and could help it gain market share.
Also, its balance sheet is excellent with $1.2 billion in cash, $658 million in operating cash flow, and just $29 million in debt, with a low debt-to-equity ratio of 0.53. In addition, it has an operating margin of 36%. Tradeweb Markets should have plenty of resources to continue to grow over the long term.
