Nasdaq’s NDAQ focus on Market Technology and Information Services businesses, improving operating leverage and solid capital position continue to drive the company.
It has a solid history of delivering earnings surprise in the last nine reported quarters.
Zacks Rank & Price Performance
Nasdaq currently carries a Zacks Rank #2 (Buy). Year to date, the stock has rallied 23.9%, compared with the industry’s increase of 7.8%, the Zacks Finance sector’s increase of 19.5% and the Zacks S&P 500 composite’s rise of 12.6%.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2021 earnings is pegged at $6.77, up 9.6% on 13% higher revenues of $3.3 billion. The expected long-term earnings growth rate is 5.8%, in line with the industry average.
Return on Equity (ROE)
The company’s ROE for the trailing 12 months is 18%, comparing favorably with the industry’s 11.4%, reflecting efficient utilization of shareholders’ money.
The Zacks Consensus Estimate for 2021 and 2022 has moved 5.9% and 3.8% higher in the past 60 days, reflecting analyst optimism.
Nasdaq boasts significant and leading positions in large, high growth markets like Index, Analytics, Market Technology, and IR & ESG Services.
Nasdaq has been accelerating its non-trading revenue base, which includes market technology, listing and information revenues. It expects 5%-8% revenue organic growth at Investment Intelligence, 8%-11% at Market Technology and 3%-5% at Corporate Platforms over the medium term.
The company expects 5% to 7% organic revenue growth from Solutions segments (non-trading revenue) over the medium term.
It targets 5% to 8% of revenues generated from new trading offerings and products by 2025.
Nasdaq eyes strategic acquisitions to grow meaningfully. Its Verafin buyout complements its established reg tech leadership to create a global SaaS leader focused on the $12.5 billion market for anti-financial crime technology solutions.
The company is poised to leverage favorable global trends and targets 6% global asset under management 10-year CAGR by 2025.
Nasdaq narrowed its 2021 non-GAAP operating expense guidance to the range of $1.57 billion to $1.62 billion from the earlier guidance of $1.55 billion to $1.62 billion. Its non-GAAP operating margin has expanded 1440 basis points since 2016.
Strong Capital Position
Nasdaq boasts a healthy balance sheet and cash position along with modest operating cash flow from its diverse business model. Though its leverage has deteriorated over the last few years, times interest earned has improved since 2017.
Banking on strong capital position, the company increased dividend at a five-year CAGR (2017-2021) of 7.3%, yielding 1.17%. The company had $248 million remaining under its share repurchase authorization as of Mar 31, 2021.
Nasdaq remains committed to deploy capital effectively by de-leveraging, investing in organic growth initiatives, pursuing strategic acquisitions, increasing dividend and engaging in buybacks.
Other Stocks to Consider
Some other top-ranked stocks from the finance sector include OTC Markets Group OTCM, Brown & Brown BRO and Marsh & McLennan MMC, each carrying Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
OTC Markets delivered 46.15% earnings surprise in the last reported quarter.
Brown & Brown delivered earnings surprise of 25.00% in the last reported quarter.
Marsh & McLennan delivered earnings surprise of 17.06% in the last reported quarter.
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