Nasdaq, Inc. (NDAQ - Free Report) remains well-poised for growth, banking on both organic initiatives as well as strategic acquisitions. This Zacks Rank #2 (Buy) company intensified its focus on Market Technology and Information Services businesses, offering the biggest growth opportunities.
The company’s focus on expanding up its non-transaction revenue base should lend a continued support to its organic growth. Management expects non-transaction revenues to grow 8-1% over the medium term.
The company’s compelling inorganic story has helped it grow, enhance capabilities and already proven to be accretive to its operational results. As part of its recent strategic endeavor, the company announced that it will buy the Swedish company Cinnober, providing financial technology to brokers, exchanges and clearing houses with a view to ramp up its technology and analytics capability.
Nasdaq flaunts a healthy balance sheet and a solid cash position along with modest operating cash flow from its diverse business model. The company regularly hikes dividends and engages in share buyback, thereby adding shareholder value. Its dividend yields 2.04%, better than industry average of 1.52%. The company had $386 million remaining outstanding under its authorization program as of Jun 30, 2018.
Nasdaq’s return on equity — a profitability measure — is 13.4%, better than the industry average of 10.6%. This reflects the company’s competence in utilizing its shareholders’ money.
Shares of Nasdaq have rallied 12.5% year to date, outperforming the industry’s 11.4% increase.
The Zacks Consensus Estimate for current-year earnings per share is pegged at $4.82 on revenues of $2.5 billion, representing a year-over-year top and bottom-line improvement of 18.7% and 3.7%, respectively.
For 2019, the Zacks Consensus Estimate for earnings per share stands at $5.22 on revenues of $2.6 billion, indicating a year-over-year increase of nearly 8.2% and 2.7%, respectively.
The expected long-term earnings growth rate is pegged at 9.6%, much higher than the industry average of 8.8%.
Nasdaq surpassed the Zacks Consensus Estimate in the last seven quarters with an average beat of 3.69%, reflecting its operational efficiencies.
Also, looking at the company’s price-to-book ratio — the best multiple for valuing securities and exchanges because of large variations in their earnings results from one quarter to the next — shares are underpriced at the current level. The company has a trailing 12-month P/B ratio of 2.6, lower than the industry average of 2.8.
Other Stocks to Consider
Other top-ranked stocks from the finance sector include Arch Capital Group Ltd. (ACGL - Free Report) , AXIS Capital Holdings Limited. (AXS - Free Report) and Berkshire Hathaway Inc. (BRK.B - Free Report) , each sharing the same bullish Zacks Rank of 2 with Nasdaq. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Arch Capital provides property, casualty and mortgage insurance and reinsurance products worldwide. It delivered a 13.46% positive surprise in the earlier reported quarter.
AXIS Capital provides various specialty insurance and reinsurance products worldwide. Last reported quarter, it pulled off a 6.72% earnings surprise.
Berkshire Hathaway engages in insurance, freight rail transportation and utility businesses. It came up with a 22.91% beat in the previously reported quarter.
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