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

Core Insights - Nasdaq, Inc. (NDAQ) shares have increased by 19.5% over the past year, outperforming the industry growth of 6% and the Finance sector's return of 17.2% [1] - The company has a market capitalization of $49.76 billion and an average trading volume of 3.5 million shares over the last three months [1] - NDAQ has consistently beaten earnings estimates in the last four quarters, with an average surprise of 4.36% [1] Valuation - Nasdaq shares are currently trading at a forward price-to-earnings ratio of 24.13X, which is lower than the industry average of 24.19X [2] - Other companies like Intercontinental Exchange Inc. (ICE) and CME Group Inc. (CME) are also trading at discounts to the industry average, while Cboe Global Markets (CBOE) trades at a premium [2] Growth Projections - The Zacks Consensus Estimate for Nasdaq's 2025 earnings per share indicates a year-over-year increase of 17.7%, with revenues projected at $5.14 billion, reflecting a 10.5% improvement [3] - For 2026, earnings per share and revenues are expected to increase by 11.4% and 7.2%, respectively, compared to 2025 estimates [3][4] Analyst Sentiment - Four out of twelve analysts have raised their earnings estimates for 2025, and three have done so for 2026 in the past 60 days, leading to a 1.2% and 0.5% increase in the consensus estimates for those years [8] Financial Performance - Nasdaq's return on equity over the trailing 12 months was 15.9%, surpassing the industry average of 14.5% [9] - The return on invested capital (ROIC) was 7.1%, also better than the industry average of 6% [10] 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 [11] - The company anticipates strong growth from its index and analytics businesses, with Capital Access Platforms expected to grow revenues by 5% to 8% in the medium term [12] Market Opportunities - Nasdaq has a significant opportunity in the anti-financial crime space, which has a total addressable market of $12.5 billion [13] - The company aims to achieve 40-50% of its revenues from SaaS solutions by 2025 [13] Dividend Policy - Nasdaq has a consistent dividend growth history and aims for a payout ratio of 35-38% by 2027 [14]