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This Beaten-Down Growth Stock Keeps Gaining Market Share: Should You Buy It? | The Motley Fool

With the S&P 500 down 17.3% in 2022 and flirting with bear market territory, it can be stressful trying to stay the course as an investor. This is especially true as many high-flyer growth stocks have taken a big hit. What these investors need to remember is that market sell-offs can create great opportunities to buy stellar companies at cheaper prices.

One rapidly growing company has seen its stock fall about 36% from its high point late last year is Tradeweb Markets (TW -1.06%). Tradeweb is a growth stock that has also gotten punished along with the broader market. The thing is, this company is quickly adding to its market share, making it hard to ignore as a potential bargain.

Image source: Getty Images.

Modernizing trading for Wall Street’s biggest investors

Tradeweb Markets is a trading platform created for the big players on Wall Street — like hedge funds, central banks, and market makers. Tradeweb brought large-scale markets into the digital era in 1996, at the beginning of the tech revolution. It has established itself as a leader in the industry since going public in 2019.

Tradeweb’s competition includes the likes of Nasdaq (NDAQ -0.73%), MarketAxess Holdings, Bloomberg, Intercontinental Exchange, and CME Group, to name a few. Tradeweb has excelled at listening to clients and creating a better trading experience. One way it did this was by purchasing Nasdaq’s fixed-income trading platform for $190 million last year — which served to increase clients’ access to different products while also reducing trading costs. This client-first mentality is why Tradeweb keeps grabbing a larger share of the markets it serves.

Tradeweb’s fast-growing business is summed up in two charts

Tradeweb serves several markets. Its biggest market is interest rate products. These include U.S. Treasuries, European government bonds, and derivatives related to these assets. One way you can see Tradeweb’s growth is through the increase in volume of the industry compared to the company’s volume growth.

A chart shows the volume growth across different assets for the market and for Tradeweb.

Image source: Tradeweb Markets.

Since 2015, interest rate products have seen volume grow 7% compounded annually across the board. During this same time, Tradeweb’s volume has grown 21%. This is the case with Tradeweb’s other products: credit (U.S. high-grade, high-yield debt, municipal bonds), equities (exchange-traded funds), and money market accounts.  

One area where Tradeweb has taken market share the quickest is the U.S. Treasuries market. In 2016, the company served 7.5% of this market’s volume but now has nearly 20% of the market’s volume through the first quarter of this year.  

A chart shows Tradeweb's share of the U.S. Treasury market since 2016.

Image source: Tradeweb Markets.

A growth stock that is on sale

Tradeweb has excelled at listening to customers and upgrading its trading platform, driving its market share growth. This has helped the company deliver strong earnings results, with revenue growing at a 16% compound annual growth rate since 2016.  

One aspect that could have investors cautious is Tradeweb’s high valuation. The company trades at a price-to-earnings ratio (P/E) of 56.3. In a market where growth stocks get beat up, investors may not want to jump into this stock all at once.

However, the company trades at a forward P/E ratio of 34.8, reflecting strong growth expectations from analysts. Analysts expect Tradeweb’s earnings per share (EPS) to grow 15% in 2022 and another 13% in 2023.  

TW PE Ratio Chart

TW PE Ratio data by YCharts

Tradeweb has displayed a knack for taking market share and has put up stellar growth numbers over the years. While the stock is at a high valuation, it is 36% off its highs from 2021, and now may not be a bad time to begin building a position in the fast-growing trading platform.



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