BMO Capital Markets upgraded TMX Group (TSX:X:CA) (OTCPK:TMXXF), parent of the Toronto Stock Exchange, TSX Venture Exchange and others, to Outperform from Market Perform as the company's organic revenue growth shifts higher.
TMX Group (X:CA) rose 3.9% in Monday midday trading.
Analyst Étienne Ricard lists a range of contributions backing the growth outlook, including its recent VettaFi acquisition, an expanded Montréal Exchange offering, asset class and geographic expansion at Trayport, BOX market share gains, and Datalinx revenue monetization.
Progress against transformational objectives is at a turning point, the analyst said, noting that 55%+ of TMX's recurring revenue, compared with its objective of 66%+, and 45%+ revenue, vs. its 50%+ target, are from outside of Canada.
TMX (OTCPK:TMXXF) trades at 20x adjusted earnings multiple, or a 2x discount to global exchange peers and a 4x discount to exchange peers with a more recurring revenue mix. "We argue this discount is unwarranted in light of peer-leading earnings growth prospects (2023-26E: +12% CAGR; peer average: +7%) and relative revenue predictability (56% recurring; peer average: 35%)," Ricard noted.