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7 Reasons Why You Should Retain Nasdaq in Your Portfolio


Estimates for Nasdaq, Inc. NDAQ have been revised upward over the past 30 days, reflecting analysts’ confidence in the stock. The stock has seen the Zacks Consensus Estimate for 2018 and 2019 earnings being raised 1.4% and 0.9% to $4.90 and $5.35, respectively.

Nasdaq is a global exchange company, trading and clearing across various asset classes, market data products among others. Shares of this Zacks Rank #3 (Hold) securities exchange have rallied 17.2% year to date, outperforming the industry’s growth of 5.3%.

Let’s focus on the factors that make Nasdaq a stock to hold on to for greater returns.

Growth Initiatives: Nasdaq intensified its focus on Market Technology and Information Services businesses, offering biggest growth opportunities. It also lays an emphasis on its core special marketplace platform businesses. Additionally, the company intends to lower its capital resources for investment in business, failing to offer considerable growth for Nasdaq.

Nasdaq’s growth has also been driven by its initiatives to accelerate non-transaction revenue base including market technology, listing and information revenues. Management estimates medium-term outlook of 8%-11% growth.

Compelling Inorganic Growth Story: Nasdaq has accelerated its growth profile via prudent acquisitions that helped it expand its technology offering, gain a direct access to the Canadian equities market and fortify its Corporate Solutions business. Buyouts continue to enhance the company’s capabilities and have already been accretive to its operational results.

Improving Top Line: Driven by both organic and inorganic strategic initiatives, Nasdaq has been witnessing its top line growing over the last several quarters. We hope this trend will continue, given the company’s endeavor to pursue initiatives to ramp up its growth profile.

Effective Capital Management: Nasdaq boasts a healthy balance sheet and a solid cash position along with modest operating cash flow from its diverse business model. This in turn aided the company to raise dividends at a four-year CAGR of 35.6%. The company has a $627-million share buyback authorization. Its dividend yield betters the industry average, making the stock an attractive pick for yield-seeking investors.

Growth Projections: The Zacks Consensus Estimate for current-year earnings per share is pegged at $4.90, representing a year-over-year increase of 20.7% on 5.1% higher revenues of $2.6 billion.

For 2019, the consensus mark for earnings per share is pegged at $5.35 on $2.7 billion revenues, thus depicting a respective 9.2% and 3.6% year-over-year rise.

Nasdaq has an expected long-term earnings per share growth rate of 9.7%.

Positive Earnings Surprise History: The company flaunts an encouraging earnings surprise history, having exceeded the Zacks Consensus Estimate in each of the trailing six quarters with an average beat of 4.2%. This trend of consecutive estimate beats underscores the company’s operational excellence.

Underpriced: The shares are trading lower than the industry average. Considering the company’s price-to-book ratio, the trailing 12-month P/B ratio of 2.6 falls below the industry average of 2.8.

Stocks to Consider

Some better-ranked stocks from the finance sector are CME Group CME, Markel Corporation MKL and RLI Corp. RLI.

CME Group operates contract markets for the trading of futures and options on futures contracts worldwide. It pulled off an average four-quarter positive surprise of 1.86%. It carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Markel markets and underwrites specialty insurance products in the United States, the United Kingdom, Canada and internationally. The company came up with positive surprises in the last four quarters, the average beat being 15.54%. The stock sports a Zacks Rank #1.

RLI Corp. underwrites property and casualty insurance in the United States and internationally. The company delivered an average positive surprise of 33.65% and has a Zacks Rank of 1.

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