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

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Nasdaq Inc.’s (NDAQ - Free Report) accelerating organic growth, focus on ramping up the on-trading revenue base, strategic buyouts to capitalize on growing markets opportunities, effective capital deployment along with favorable growth estimates make it worth retaining in one’s portfolio.

NDAQ has a solid track record of beating earnings estimates in the last 14 quarters.

Zacks Rank & Price Performance

Nasdaq currently carries a Zacks Rank #3 (Hold). Year to date, the stock has lost 11.2% compared with the industry’s decrease of 27.7%.

Zacks Investment Research
Image Source: Zacks Investment Research

Optimistic Growth Projections

The Zacks Consensus Estimate for Nasdaq’s 2022 earnings is pegged at $7.98, indicating a 5.6% increase from the year-ago reported figure on 5.2% higher revenues of $3.6 billion. The consensus estimate for 2023 earnings is pegged at $8.51, indicating a 6.6% increase from the year-ago reported figure on 5.1% higher revenues of $3.8 billion.

The expected long-term earnings growth rate is currently pegged at 8%.

Return on Equity

Return on equity was 21.4% in the trailing twelve months, better than the industry average of 13.5%.

Northbound Estimate Revision

The Zacks Consensus Estimate for 2022 has moved north by 0.4%, while the consensus estimate for 2023 has moved 0.9% in the past 60 days, reflecting analyst optimism.

Growth Drivers

Nasdaq’s growth strategy involves generating more revenues from high-growth Market Technology and Investment Intelligence segments and diverting R&D spending toward higher-growth products.

Given the vast opportunities in the cryptocurrency markets, Nasdaq has been accelerating its technology expansion. Technology expansion with SMARTS surveillance in non-financial markets is in tandem with this growth strategy.

Nasdaq noted that the anti-fin crime space has a total addressable market of $12.5 billion and is expected to witness a CAGR of 17% through 2024. The acquisition of Verafin in February 2021 consolidated Nasdaq's established reg tech leadership to create a global SaaS leader. Nasdaq aims 40-50% Saas revenues as a percentage of total revenues by 2025.

The buyout of and Metrio will help NDAQ address expanding client ESG needs.

NDAQ estimates growth from its index and analytics businesses, followed by moderate growth in its exchange data products across U.S. and Nordic equities.  Nasdaq estimates 5%- 8% revenue organic growth in Investment Intelligence, 8%-11% in Market Technology, 3%-5% in Corporate Platforms and 6%-9% growth in the Solutions segment over the medium term.

Nasdaq boasts a healthy balance sheet and cash position along with modest operating cash flow from its diverse business model. This, in turn, helps in effective capital deployment. It had $293 million remaining under its share repurchase authorization as of Jun 30, 2022.

Impressive Dividend History

Nasdaq has been hiking dividends at a five-year CAGR (2018-2022) of 9.6%. Its dividend yield is currently 2%, above the industry average of 11.6%.

Stocks to Consider

Some better-ranked stocks from the finance sector are W.R. Berkley Corporation (WRB - Free Report) , Arch Capital Group (ACGL - Free Report) and ProAssurance Corporation (PRA - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

W.R. Berkley’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 29.95%. Year to date, W.R. Berkley stock has gained 23.9%.

The Zacks Consensus Estimate for WRB’s 2022 and 2023 earnings per share indicates year-over-year increases of 50.6% and 10.4%, respectively.

Arch Capital’s earnings surpassed estimates in three of the last four quarters and missed in one, the average beat being 33.64%. Year to date, ACGL has gained 6.9%.

The Zacks Consensus Estimate for ACGL’s 2022 and 2023 earnings implies a 29.6% and 14.8% year-over-year increase, respectively.

The bottom line of ProAssurance surpassed earnings estimates in three of the last four quarters and missed in one, the average beat being 150.9%. Year to date, the insurer has lost 8.8%.

The Zacks Consensus Estimate for ProAssurance’s 2022 and 2023 earnings has moved 16.9% and 13.9% north, respectively, in the past seven days.

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