11/5/24 - $mktx - Hard to justify valuation near $300

5 thg 11

11/5/24 :: VROCKSTAR :: MKTX
Hard to justify valuation near $300

- a few ways to think about this
- first, seems like they've got a nice niche that could be M&A addressable to larger institutions
- second, quite correlated to rates, as you can see from this basic 10Y overlay. the disconnect for me in the last 2 yr seems pretty glaring
- so you look at EPS... growing low DD, but PE is high 20s? mm that's pretty expensive.
- how about we go out 2 years where book value is ~550/SHR a nice round # and we say (ROE - g)/(Ke - g) = (25 - 5)/(10 - 5) = 4x multiplier. I'm being generous here on probably ROE (now closer to low 20s) but perhaps "g" remains HSD and Ke is lower. ANYWAY, this puts me at $50 * 4 = $200. again, a touch lower.
- listen, this is just something that doesn't get me excited. it's a large biz, correlated to rates, valuation isn't "obvious". I'd probably be a buyer in the high 100s, call it $175-180. but otherwise i'm happy to have just taken a look and moved on.

V