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Here's Why You Should Stay Invested in Nasdaq (NDAQ) Stock
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Nasdaq’s (NDAQ - Free Report) impressive organic growth, ramping up of on-trading revenue base, strategic buyouts to capitalize on growing market opportunities and effective capital deployment make it worth retaining in one’s portfolio.
Nasdaq has a decent track record of beating estimates in the last three reported quarters of 2023. Return on equity was 21.6% in the trailing 12 months, better than the industry average of 12.4%.
Return on invested capital hovered around 10% over the last few years. The company has raised its capital investment significantly, reflecting NDAQ’s efficiency in utilizing funds to generate income.
Notably, its free cash flow conversion has remained more than 100% over the last many quarters, reflecting its solid earnings.
Zacks Rank & Price Performance
Nasdaq currently carries a Zacks Rank #3 (Hold). Quarter to date, the stock has gained 15.4% compared with the industry’s rise of 20.2%.
Image Source: Zacks Investment Research
Business Tailwinds
Nasdaq remains focused on generating more revenues from high-growth Market Technology and Investment Intelligence segments. It is also redirecting R&D spending toward higher-growth products. NDAQ targets 5-7% long-term growth from a non-trading revenue base. The company is expanding its Anti-Financial Crime clientele as well as making innovations.
Nasdaq has an impressive inorganic growth story. The Adenza Group buyout will boost its Marketplace Technology and Anti-Financial Crime solutions. The transaction also strengthens its offerings across a wider spectrum of regulatory technology, compliance and risk management solutions.
NDAQ expects annualized recurring revenues, as a percentage of 2023 proforma total revenues, to increase to 60% from 56% in 2022. It also estimates Nasdaq’s Solutions Businesses, as a percentage of 2023 proforma total revenues, to increase to 77% due to the addition of Adenza Group. It is also expected to improve Solutions Business's medium-term organic revenue growth to 8-11%.
NDAQ has been investing in proprietary data and migrating markets and SaaS solutions to capitalize on the immense opportunity offered by the cryptocurrency markets.
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. Thus, the strategic acquisition of Verafin in February 2021 was targeted to consolidate 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 company estimates strong 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, 13-16% in Market Technology and 3-5% in Corporate Platform segments over the medium term.
Due to a change in corporate structure, NDAQ estimates to incur $115 million to $145 million in pretax charges, of which about 40% will be non-cash charges. Nonetheless, this will help unlock revenue synergies. Nasdaq estimates benefits in the form of combined annual run rate operating efficiencies and revenue synergies of at least $30 million by 2025.
Based on operational expertise, NDAQ’s bottom line has grown 13.6% over the last five years, better than the industry average of 10.5%. The expected long-term earnings growth is pegged at 6.2%.
Impressive Capital Payout
Banking on the strength of a diverse business model that helps maintain a healthy balance sheet and cash position, NDAQ increased its dividend at a nine-year (2015-2023) CAGR of 6%. It also has $2 billion remaining in its authorization kitty.
Nasdaq intends to pursue its existing capital deployment plan, including steadily increasing its dividend per share and dividend payout ratio, to achieve 35-38% payout within three to four years.
Cboe Global delivered a trailing four-quarter average earnings surprise of 4.08%. Year to date, the stock has risen 40.3%. The Zacks Consensus Estimate for CBOE’s 2024 earnings suggests a year-over-year rise of 6%. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Coinbase has a decent track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 62.95%. COIN stock has climbed 374.8% year to date. The Zacks Consensus Estimate for COIN’s 2024 earnings per share indicates a year-over-year increase of 30.4%. It carries a Zacks Rank #2 (Buy).
Estimates for Deutsche Boerse’s 2024 earnings per share indicate a year-over-year increase of 4%. Year to date, DBOEY has gained 17.3%. The expected long-term earnings growth rate is 10.2%, better than the industry average of 7.4%. It carries a Zacks Rank #2.
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Here's Why You Should Stay Invested in Nasdaq (NDAQ) Stock
Nasdaq’s (NDAQ - Free Report) impressive organic growth, ramping up of on-trading revenue base, strategic buyouts to capitalize on growing market opportunities and effective capital deployment make it worth retaining in one’s portfolio.
Nasdaq has a decent track record of beating estimates in the last three reported quarters of 2023. Return on equity was 21.6% in the trailing 12 months, better than the industry average of 12.4%.
Return on invested capital hovered around 10% over the last few years. The company has raised its capital investment significantly, reflecting NDAQ’s efficiency in utilizing funds to generate income.
Notably, its free cash flow conversion has remained more than 100% over the last many quarters, reflecting its solid earnings.
Zacks Rank & Price Performance
Nasdaq currently carries a Zacks Rank #3 (Hold). Quarter to date, the stock has gained 15.4% compared with the industry’s rise of 20.2%.
Image Source: Zacks Investment Research
Business Tailwinds
Nasdaq remains focused on generating more revenues from high-growth Market Technology and Investment Intelligence segments. It is also redirecting R&D spending toward higher-growth products. NDAQ targets 5-7% long-term growth from a non-trading revenue base. The company is expanding its Anti-Financial Crime clientele as well as making innovations.
Nasdaq has an impressive inorganic growth story. The Adenza Group buyout will boost its Marketplace Technology and Anti-Financial Crime solutions. The transaction also strengthens its offerings across a wider spectrum of regulatory technology, compliance and risk management solutions.
NDAQ expects annualized recurring revenues, as a percentage of 2023 proforma total revenues, to increase to 60% from 56% in 2022. It also estimates Nasdaq’s Solutions Businesses, as a percentage of 2023 proforma total revenues, to increase to 77% due to the addition of Adenza Group. It is also expected to improve Solutions Business's medium-term organic revenue growth to 8-11%.
NDAQ has been investing in proprietary data and migrating markets and SaaS solutions to capitalize on the immense opportunity offered by the cryptocurrency markets.
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. Thus, the strategic acquisition of Verafin in February 2021 was targeted to consolidate 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 company estimates strong 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, 13-16% in Market Technology and 3-5% in Corporate Platform segments over the medium term.
Due to a change in corporate structure, NDAQ estimates to incur $115 million to $145 million in pretax charges, of which about 40% will be non-cash charges. Nonetheless, this will help unlock revenue synergies. Nasdaq estimates benefits in the form of combined annual run rate operating efficiencies and revenue synergies of at least $30 million by 2025.
Based on operational expertise, NDAQ’s bottom line has grown 13.6% over the last five years, better than the industry average of 10.5%. The expected long-term earnings growth is pegged at 6.2%.
Impressive Capital Payout
Banking on the strength of a diverse business model that helps maintain a healthy balance sheet and cash position, NDAQ increased its dividend at a nine-year (2015-2023) CAGR of 6%. It also has $2 billion remaining in its authorization kitty.
Nasdaq intends to pursue its existing capital deployment plan, including steadily increasing its dividend per share and dividend payout ratio, to achieve 35-38% payout within three to four years.
Stocks to Consider
Some better-ranked stocks from the finance sector are Cboe Global Markets (CBOE - Free Report) , Coinbase Global (COIN - Free Report) and Deutsche Boerse (DBOEY - Free Report) .
Cboe Global delivered a trailing four-quarter average earnings surprise of 4.08%. Year to date, the stock has risen 40.3%. The Zacks Consensus Estimate for CBOE’s 2024 earnings suggests a year-over-year rise of 6%. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Coinbase has a decent track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 62.95%. COIN stock has climbed 374.8% year to date. The Zacks Consensus Estimate for COIN’s 2024 earnings per share indicates a year-over-year increase of 30.4%. It carries a Zacks Rank #2 (Buy).
Estimates for Deutsche Boerse’s 2024 earnings per share indicate a year-over-year increase of 4%. Year to date, DBOEY has gained 17.3%. The expected long-term earnings growth rate is 10.2%, better than the industry average of 7.4%. It carries a Zacks Rank #2.