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Here's Why You Should Hold Nasdaq (NDAQ) in Your Portfolio

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Nasdaq’s (NDAQ - Free Report) focus on Market Technology and Information Services businesses, improving operating leverage and solid capital position make its worthy of retention in one’s portfolio.

Growth Projections

The Zacks Consensus Estimate for 2021 earnings is pegged at $6.40, which indicates 3.6% increase year over year on 5.6% higher revenues of $3.1 billion. The consensus estimate for 2022 earnings is pegged at $6.83, indicating year-over-year increase of 6.2% on 5.3% higher revenues of $3.2 billion. The expected long-term earnings growth rate is pegged at 4.1%.

Zacks Rank & Price Performance

Nasdaq currently carries a Zacks Rank #3 (Hold). Year to date, the stock has rallied 10.8%, outperforming the industry’s increase of 2.6%.

Return on Equity (ROE)

The company’s ROE for the trailing 12 months is 17.5%, better than the industry average of 11.8%. It reflects the company’s efficiency in utilizing shareholders’ fund.  The company targets double-digit total shareholders return.

Estimate Revision

The Zacks Consensus Estimate for 2021 and 2022 has moved 0.8% and 0.4% north in the past 30 days, reflecting analyst optimism.

Earnings Surprise History

Nasdaq surpassed estimates in the last eight reported quarters, with the average beat being 4.67%.

Business Tailwinds

Nasdaq boasts significant and leading positions in large, high growth markets like Index, Analytics, Market Technology, and IR & ESG Services. It targets 5% to 8% of revenues generated from new trading offerings and products by 2025.

Nasdaq has invested $1.2 billion in growth platforms and targets a significant share of more than $22 billion addressable market.

Nasdaq’s organic growth has been also aided by its strategy of accelerating its non-trading revenue base, which includes market technology, listing and information revenues. It estimates 5%-8% revenue organic growth at Investment Intelligence, 8%-11% at Market Technology and 3%-5% at Corporate Platforms over the medium term. Nasdaq estimates non-trading revenues to grow 5%-7% over the long term.

Riding on the strength of its healthy balance sheet, the company increased dividend at a five-year CAGR (2016-2020) of 13.5%. It had $410 million remaining under its share repurchase authorization as of Dec 31, 2020.

Stocks to Consider

Some better-ranked stocks from the finance sector include Athene (ATH - Free Report) , Sun Life Financial (SLF - Free Report) and James River Group Holdings (JRVR - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Athene delivered an earnings surprise of 31.9% in the last reported quarter.

Sun Life Financial delivered an earnings surprise of 17.71% in the last reported quarter.

James River Group delivered an earnings surprise of 6.86% in the last reported quarter.

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