Virtu Financial, Inc. (VIRT) Stock Analysis and Metrics

Sector: Financial Services Industry: Capital Markets CIK: 0001592386

Market Cap 3.09 Bn

P/B 2.12

P/E 7.31

P/S 0.88

ROIC (Qtr) 6.79

Div Yield % 3.55

Rev 1y % (Qtr) 16.69

Total Debt (Qtr) 17.01 Bn

Debt/Equity (Qtr) 11.69

About

Virtu Financial, Inc., with ticker symbol VIRT, is a prominent player in the financial industry, specializing in providing liquidity to global markets and innovative trading solutions. The company's operations span across multiple business activities, including market making, execution services, and corporate activities. At its core, Virtu Financial operates in the financial markets, providing essential services that contribute to the smooth functioning of the industry. Its primary business activities involve market making and execution services....

Virtu Financial, Inc., with ticker symbol VIRT, is a prominent player in the financial industry, specializing in providing liquidity to global markets and innovative trading solutions. The company's operations span across multiple business activities, including market making, execution services, and corporate activities.

At its core, Virtu Financial operates in the financial markets, providing essential services that contribute to the smooth functioning of the industry. Its primary business activities involve market making and execution services. Market making entails providing liquidity to various asset classes, such as global equities, fixed income, currencies, commodities, and even cryptocurrencies. This is achieved by buying and selling large volumes of securities and other financial instruments while earning small bid/ask spreads. Virtu's market making platform is designed to generate and disseminate continuous bid and offer quotes, and its systems capture and deliver trade information back to the source in real-time.

On the other hand, the execution services segment offers agency execution services and trading venues that provide transparent trading in global equities, ETFs, fixed income, currencies, and commodities to institutions, banks, and broker-dealers. Virtu earns commissions when transacting as an agent for its clients. The execution services segment includes electronic execution services, algorithmic trading, order routing, and an execution management system (EMS). Virtu's EMS helps portfolio managers and traders to trade orders quickly, comprehensively, and cost-efficiently from its EMS or its Order Management System (OMS).

Virtu Financial's revenue generation is primarily driven by these two segments. The market making segment contributes significantly to the company's revenue due to its design, which allows Virtu to earn revenue by buying and selling large volumes of securities and other financial instruments. The execution services segment, on the other hand, earns commissions by providing transparent trading solutions to its clients.

In terms of its competitive position, Virtu Financial is a leading player in the global financial markets, with a strong presence in multiple asset classes. The company's competitive advantages include its technology-enabled market making capabilities, its global reach, and its ability to provide transparent and efficient trading solutions to its clients. Key competitors include other market makers and execution services providers, such as Citadel Securities, Jane Street, and GTS.

Virtu Financial's clients are diverse and include sell-side clients, such as global, national, and regional broker-dealers and banks, as well as buy-side clients, including mutual funds, pension plans, plan sponsors, hedge funds, trusts, and endowments. These clients can access a broad range of products and services, including electronic execution services, algorithmic trading, order routing, and an EMS.

Price action

Investment thesis

Bull case

Robust free cash flow of 339.20M exceeds capital expenditure of 61.29M by 5.53x, indicating strong organic growth funding capability.
Cash reserves of 755.41M provide ample 19.91x coverage of acquisition spending 37.93M, enabling strategic growth opportunities.
Strong free cash flow of 339.20M provides 8.94x coverage of acquisition spending 37.93M, indicating disciplined M&A strategy.
Operating cash flow of 400.48M provides strong 3.30x coverage of operating expenses 121.40M, showing operational efficiency.
Cash reserves of 755.41M provide comfortable 4.30x coverage of tax obligations 175.82M, showing strong fiscal management.

Bear case

Operating cash flow of 400.48M barely covers its investment activities of (43.97M), with a coverage ratio of -9.11, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
Operating cash flow of 400.48M provides thin coverage of dividend payments of (378.20M) with a -1.06 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
The company's operating cash flow of 400.48M shows concerning coverage of stock compensation expenses of 95.88M, with a 4.18 ratio indicating potential earnings quality issues.
Operating cash flow of 400.48M is outpaced by equity issuance of (228.59M) (-1.75 ratio), indicating concerning reliance on equity markets for funding operations.
Cash position of 755.41M provides weak coverage of payables of 2.38B, which is 0.32x, indicating potential working capital stress and supplier relationship risks.

Peer comparison

Companies in the Capital Markets

S.No.	Ticker	Company	Market Cap	P/E	P/S	Total Debt (Qtr)
1	GS	Goldman Sachs Group Inc	284.23 Bn	17.94	4.84	911.32 Bn
2	MS	Morgan Stanley	279.63 Bn	17.97	4.05	353.12 Bn
3	SCHW	Schwab Charles Corp	179.33 Bn	23.09	7.83	27.59 Bn
4	HOOD	Robinhood Markets, Inc.	106.92 Bn	48.73	25.43	0.00 Bn
5	CRCL	Circle Internet Group, Inc.	40.97 Bn	261.00	24.22	0.15 Bn
6	IBKR	Interactive Brokers Group, Inc.	28.23 Bn	30.79	4.75	28.43 Bn
7	LPLA	LPL Financial Holdings Inc.	27.60 Bn	33.13	1.77	7.52 Bn
8	FUTU	Futu Holdings Ltd	22.89 Bn	18.13	8.54	1.75 Bn

Industry comparisons

Current Valuation	Value	Ind Avg
EV to Assets EV to Assets	0.84	1.07
EV to Cash from Ops. EV/CFO	44.82	15.33
EV to Debt EV to Debt	1.06	21.89
EV to EBIT EV/EBIT	13.85	-0.80
EV to EBITDA EV/EBITDA	10.24	11.20
EV to Free Cash Flow [EV/FCF] EV/FCF	52.92	43.08
EV to Market Cap EV to Market Cap	5.81	-0.05
EV to Revenue EV/Rev	5.13	12.82
Price to Book Value [P/B] P/B	2.12	3.09
Price to Earnings [P/E] P/E	7.31	6.20

Dividend Metrics	Value	Ind Avg
Dividend Coverage Ratio Div Coverage (Qtr)	1.12	4.22
Dividend Payout Ratio % Div Payout % (Qtr)	20.70	10.37
Dividend per Basic Share Div per Share (Qtr)	0.96	0.70
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr)	24.00	-8.68
Interest Coverage Int. cover (Qtr)	1.78	37.53

Growth Metrics	Value	Ind Avg
Capex Growth (1y) % Capex 1y % (Qtr)	8.51	-12,429.64
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr)	2.33	1,588.78
Dividend Growth (1y) % Div 1y % (Qtr)	0.00	4.88
EBIAT Growth (1y) % EBIAT 1y % (Qtr)	57.00	270.93
EBITDA Growth (1y) % EBITDA 1y % (Qtr)	46.78	333.57
EBIT Growth (1y) % EBIT 1y % (Qtr)	40.70	3,103.22
EBT Growth (1y) % EBT 1y % (Qtr)	101.54	3,039.53
EPS Growth (1y) % EPS 1y % (Qtr)	130.35	24.25
FCF Growth (1y) % FCF 1y % (Qtr)	-30.58	-80.08
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr)	39.08	51.33

Liquidity Ratios	Value	Ind Avg
Asset Utilization Ratio Asset Util Ratio (Qtr)	0.16	0.42
Cash Payout Ratio Cash Payout (Qtr)	0.82	-0.08
Cash Ratio Cash Ratio	0.00	2.01
Current Ratio Current Ratio	0.00	3.47
Debt to Equity Ratio Debt/Equity (Qtr)	11.69	1.46
Interest Cover Ratio Int Coverage (Qtr)	1.78	37.53
Times Interest Earned Times Interest Earned (Qtr)	1.78	37.53

Profitability	Value	Ind Avg
EBITDA Margin % EBITDA Margin % (Qtr)	38.90	76.68
EBIT Margin % EBIT Margin % (Qtr)	37.07	46.81
EBT Margin % EBT Margin % (Qtr)	16.25	58.57
Gross Margin % Gross Margin % (Qtr)	69.90	53.60
Net Profit Margin % Net Margin % (Qtr)	12.10	29.41

Virtu Financial, Inc. (NYSE: VIRT)

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Price action

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Industry comparisons

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