Nasdaq, Inc.’s (NDAQ - Free Report) shares have rallied 20.9% in the past year, outperforming the industry’s increase of 6%.
The rally was largely driven by the solid performance of the Market Technology and Information Services segments.
Additionally, Nasdaq’s return on equity was 16.1% in the trailing 12-month period, higher than the industry average of 12.2%. Return on equity is a profitability measure that identifies a company’s efficiency in utilizing its shareholders’ funds.
What’s Driving Nasdaq?
Estimates for Nasdaq have been revised upward over the past seven days, reflecting analysts’ confidence in the stock. The Zacks Consensus Estimate for earnings for the current year has moved up 0.3% in the said time frame.
The company has a decent earnings surprise history. It surpassed estimates in each of the trailing four quarters, the beat being 3.13%, on average.
The Zacks Consensus Estimate for current-year earnings per share is pegged at $5.59, indicating increase of nearly 11.8% from the year-ago reported figure. The expected long-term earnings growth rate is 7.6%, which betters the industry average of 6.7%.
Nasdaq witnessed revenue growth at a two-year CAGR (2017-2019) of 3.9% owing to higher revenues from Market services, Corporate Services, Information Services and Market Technology business. Notably, the Zacks Consensus Estimate for the company’s 2020 revenues is pegged at $2.69 billion, indicating an increase of 6.2% from the year-ago reported figure.
Over the past three years, Nasdaq has focused on maximizing the resources and capital allocated to the largest growth opportunities, particularly in Market Technology and Information Services segments.
In January 2019, Nasdaq boosted its Market Technology business by acquiring Cinnober to provide technology solutions to Market Technology business. The buyout strengthened Nasdaq’s position as a leading market infrastructure technology provider. This segment witnessed revenue growth at a two-year CAGR (2017-2019) of 16.9%.
Information Services set a new quarterly high in revenues, due to year-over-year growth in AUM in licensed ETPs, as well as record volumes in licensed index futures in the first quarter. This segment witnessed revenue growth at a two-year CAGR (2017-2019) of 15.1%.
Nasdaq reported impressive volumes for the month of March. While U.S. equity options volume increased 45.4% year over year to 205 million contracts, European options and futures volume rose 48.8% year over year to 12.2 million contracts.
Nasdaq also reported volumes for the month of May. While U.S. equity options volume increased 17.5% year over year to 181 million contracts, European options and futures volume decreased 37.9% year over year to 5.4 million contracts.
By virtue of its strong balance sheet and solid cash position, the company is engaged in prudent capital deployment. In April 2020, it hiked its dividend by 4% to boost shareholder value. Its dividend payout witnessed a five-year CAGR (2014-2019) of 29.3%. Its current dividend yield of 1.7% betters the industry average of 1.5%, making the stock an attractive pick for yield-seeking investors.
Stocks to Consider
Some better-ranked stocks from the security and exchange industry include MarketAxess Holdings Inc (MKTX - Free Report) , Deutsche Boerse AG (DBOEY - Free Report) and Intercontinental Exchange (ICE - Free Report) . While MarketAxess sports a Zacks Rank #1 (Strong Buy), Deutsche Boerse and Intercontinental Exchange carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
MarketAxess operates an electronic trading platform that enables fixed-income market participants to trade corporate bonds and other types of fixed-income instruments worldwide. It surpassed estimates in three of the last four quarters, with the average positive surprise being 1.09%.
Deutsche Boerse operates as an exchange organization in Europe, the United States, and the Asia-Pacific and engages in the electronic trading of derivatives, foreign exchange, operating Eurex Repo over the counter (OTC) trading platform and electronic clearing architecture. It came up with the average positive surprise of 15.38%.
Intercontinental Exchange operates regulated exchanges, clearing houses and listings venues for commodity, financial, fixed income and equity markets in the United States, European Union and Canada. It surpassed estimates in each of the last four quarters, with the average positive surprise being 4.46%.
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