Value investing is a factor-based investing strategy in which you pick stocks that you believe are trading for less than what they are intrinsically worth. Value investors believe that if a business is cheap compared to its intrinsic value, in this case, as measured by its price-to-earnings (P/E) ratio, the stock price may rise faster than others as the price comes back in line with the worth of the company.
Virtu Financial posted record results last year, thanks partly to that elevated volatility. But despite record profits in 2020, investors haven’t necessarily rewarded the company with a higher valuation. The company’s currentP/E ratio of 5.97 suggests the market is concerned that Virtu’s underlying business could decline as volatility decreases. The firm is deeply discounted, as its investments in technology in recent years have diversified revenue, making it a more stable company. That suggests this company is a good value play right now.
The company executed 1.27 billion customer orders in 2020. Equity volume remained high early this year, with $621 billion in notional volume. However, management doesn’t expect that high level of activity to continue through the year. That’s where the stability of its execution services segment is critical. Its diversification of revenue streams helps stabilize earnings, making the company worth strong consideration as a value stock investment.
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What you should know about Virtu Financial Inc.
Virtu Financial, Inc. engages in the provision of market-making and liquidity services. It operates through the following segments: Market Making, Execution Services, and Corporate. The Market Making segment engages in buying and selling of securities and other financial instruments. The Execution Services segment agency offers trading venues that provide transparent trading in global equities, ETFs, and fixed income to institutions, banks and broker-dealers.
The Corporate segment consists of investments in strategic financial services-oriented opportunities. It maintains corporate overhead expenses and all other income and expenses that are not attributable to the different segments. The company was founded by Vincent J. Viola and Douglas Cifu in 2008 and is headquartered in New York, NY.
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