NDAQ Outperforms Industry, Trades at Premium: How to Play the Stock

Core Insights - Nasdaq, Inc. (NDAQ) shares have increased by 45.8% over the past year, outperforming the Finance sector and the Zacks S&P 500 composite, which grew by 18.8% and 10.1% respectively [1] - NDAQ's market capitalization stands at $51.57 billion, with an average trading volume of 3.4 million shares over the last three months [2] - The company is trading above its 50-day and 200-day simple moving averages, indicating strong upward momentum [3] Financial Performance - NDAQ's growth in the past year is significantly higher than the industry average of 25% [6] - The Zacks Consensus Estimate for NDAQ's 2025 earnings per share indicates a year-over-year increase of 13.4%, with revenues projected at $5.05 billion, reflecting an 8.7% improvement [9] - The long-term earnings growth expectation for NDAQ is 12.1%, surpassing the industry average of 10% [10] Analyst Sentiment - Recent analyst activity shows two out of twelve analysts have raised their earnings estimates for 2025, leading to a 0.3% increase in the consensus estimate for 2025 earnings [7] Valuation Metrics - NDAQ is currently trading at a forward 12-month price-to-book ratio of 26.5X, which is above the industry average of 26.32X [8] Return on Capital - The return on equity for NDAQ in the trailing 12 months is 15.3%, exceeding the industry average of 14.1% [12] - The return on invested capital (ROIC) for NDAQ is 6.8%, also better than the industry average of 5.7% [13] Growth Strategy - Nasdaq's growth strategy focuses on increasing revenues from high-growth segments such as Market Technology and Investment Intelligence, along with expanding its Anti-Financial Crime clientele [14] - The company anticipates strong growth from its index and analytics businesses, with Capital Access Platforms expected to deliver revenue growth of 5% to 8% [15] Inorganic Growth - NDAQ's inorganic growth strategy includes expanding its technology offerings and enhancing market surveillance techniques, with a total addressable market in the anti-financial crime space estimated at $12.5 billion [16] Dividend Policy - Nasdaq has consistently increased its dividend each year and aims for a payout ratio of 35-38% by 2027 [17]