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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 currently carries a Zacks Rank #3 (Hold). Year to date, the stock has gained 7.7% compared with the industry’s rise of 5.9%. The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 1 cent north each in the past 30 days, reflecting analyst optimism.
Nasdaq has a solid track record of beating estimates in the last four reported quarters. Return on equity, reflecting the company’s efficiency in utilizing shareholders' funds, was 19.3% in the trailing 12 months, better than the industry average of 13.1%.
Return on invested capital has stayed around 10% over the last few years. The company has raised its capital investment significantly, reflecting its efficiency in utilizing funds to generate income.
Image Source: Zacks Investment Research
Growth Drivers
Nasdaq’s strategy of generating more revenues from high-growth Market Technology and Investment Intelligence segments, redirecting R&D spending toward higher-growth products, expanding its Anti-Financial Crime clientele as well as making innovations bodes well for growth. NDAQ targets 5-7% long-term growth from a non-trading revenue base.
The company has an impressive inorganic growth story. The Adenza Group buyout boosts its Marketplace Technology and Anti-Financial Crime solutions apart from strengthening offerings across a wider spectrum of regulatory technology, compliance and risk management solutions. Nasdaq estimates Solutions Business's medium-term organic revenue growth to be in the range of 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. Verafin consolidated Nasdaq's established reg tech leadership to create a global SaaS leader. Nasdaq aims to achieve 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 is estimated 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 strength, NDAQ’s bottom line has grown 12.7% over the last five years, better than the industry average of 9.8%. The expected long-term earnings growth rate is pegged at 8%. We estimate the 2026 bottom line to increase at a three-year CAGR of 6.3%.
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. Notably, its free cash flow conversion has remained more than 100% over the last many quarters, reflecting its solid earnings.
Nasdaq remains focused on its existing capital deployment plan, including steadily increasing its dividend per share and dividend payout ratio to achieve a 35-38% payout within three to four years.
Coinbase has a solid track record of beating earnings estimates in the last four quarters. COIN stock has gained 44.2% year to date. The Zacks Consensus Estimate for COIN’s 2024 EPS indicates a year-over-year increase of 386.5%.
The Zacks Consensus Estimate for Burford Capital’s 2025 EPS indicates a year-over-year increase of 15%. Year to date, BUR has lost 0.3%. Burford Capital delivered a trailing four-quarter average earnings surprise of 113.35%.
AssetMark Financial delivered a trailing four-quarter average earnings surprise of 0.81%. Year to date, the stock has risen 15.7%. The Zacks Consensus Estimate for AMK’s 2024 and 2025 earnings suggests a year-over-year rise of 13.5% and 5.55%, respectively.
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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 currently carries a Zacks Rank #3 (Hold). Year to date, the stock has gained 7.7% compared with the industry’s rise of 5.9%. The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 1 cent north each in the past 30 days, reflecting analyst optimism.
Nasdaq has a solid track record of beating estimates in the last four reported quarters. Return on equity, reflecting the company’s efficiency in utilizing shareholders' funds, was 19.3% in the trailing 12 months, better than the industry average of 13.1%.
Return on invested capital has stayed around 10% over the last few years. The company has raised its capital investment significantly, reflecting its efficiency in utilizing funds to generate income.
Image Source: Zacks Investment Research
Growth Drivers
Nasdaq’s strategy of generating more revenues from high-growth Market Technology and Investment Intelligence segments, redirecting R&D spending toward higher-growth products, expanding its Anti-Financial Crime clientele as well as making innovations bodes well for growth. NDAQ targets 5-7% long-term growth from a non-trading revenue base.
The company has an impressive inorganic growth story. The Adenza Group buyout boosts its Marketplace Technology and Anti-Financial Crime solutions apart from strengthening offerings across a wider spectrum of regulatory technology, compliance and risk management solutions. Nasdaq estimates Solutions Business's medium-term organic revenue growth to be in the range of 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. Verafin consolidated Nasdaq's established reg tech leadership to create a global SaaS leader. Nasdaq aims to achieve 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 is estimated 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 strength, NDAQ’s bottom line has grown 12.7% over the last five years, better than the industry average of 9.8%. The expected long-term earnings growth rate is pegged at 8%. We estimate the 2026 bottom line to increase at a three-year CAGR of 6.3%.
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. Notably, its free cash flow conversion has remained more than 100% over the last many quarters, reflecting its solid earnings.
Nasdaq remains focused on its existing capital deployment plan, including steadily increasing its dividend per share and dividend payout ratio to achieve a 35-38% payout within three to four years.
Stocks to Consider
Some better-ranked stocks from the finance sector are Coinbase Global (COIN - Free Report) , Burford Capital (BUR - Free Report) and AssetMark Financial (AMK - Free Report) . Each stock presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Coinbase has a solid track record of beating earnings estimates in the last four quarters. COIN stock has gained 44.2% year to date. The Zacks Consensus Estimate for COIN’s 2024 EPS indicates a year-over-year increase of 386.5%.
The Zacks Consensus Estimate for Burford Capital’s 2025 EPS indicates a year-over-year increase of 15%. Year to date, BUR has lost 0.3%. Burford Capital delivered a trailing four-quarter average earnings surprise of 113.35%.
AssetMark Financial delivered a trailing four-quarter average earnings surprise of 0.81%. Year to date, the stock has risen 15.7%. The Zacks Consensus Estimate for AMK’s 2024 and 2025 earnings suggests a year-over-year rise of 13.5% and 5.55%, respectively.