Nasdaq Inc (NDAQ, Financial) experienced a daily loss of -1.49%, and a 3-month loss of -3.76%, with an Earnings Per Share (EPS) of 2.22. This raises the question: is the stock fairly valued? This article provides an in-depth analysis of Nasdaq's valuation and encourages readers to delve into the financial intricacies of this renowned company.
Company Introduction
Nasdaq Inc (NDAQ, Financial), founded in 1971, is renowned for its equity exchange. The company's business operations span market services, market data sales and distribution, Nasdaq-branded indexes for asset managers and investors, listing services for publicly traded companies, and exchange operations for other exchanges worldwide. The company's stock price stands at $52.55, with a GF Value of $51.28, indicating a fair valuation. The following analysis provides a deeper understanding of Nasdaq's value.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line represents the stock's ideal fair trading value. If the stock price is significantly above the GF Value Line, it may be overvalued, and if it is significantly below, it may be undervalued. Nasdaq's current stock price and market cap of $25.80 billion suggest a fair valuation.
Since Nasdaq is fairly valued, the long-term return of its stock is likely to align with the rate of its business growth.
Financial Strength
Investing in companies with poor financial strength carries a higher risk of capital loss. Evaluating the financial strength of a company, such as its cash-to-debt ratio, is crucial before investing. Nasdaq's cash-to-debt ratio of 0.54 is lower than 74.01% of companies in the Capital Markets industry. Its overall financial strength is rated 5 out of 10, indicating fair financial strength.
Profitability and Growth
Companies with consistent profitability over the long term offer less risk to investors. Nasdaq has been profitable for the past 10 years, with a revenue of $6.10 billion and an operating margin of 27.68% over the past twelve months. Its profitability ranks 8 out of 10, indicating strong profitability.
Growth is a crucial factor in a company's valuation. Nasdaq's average annual revenue growth is 13.7%, ranking better than 62.09% of companies in the Capital Markets industry. However, its 3-year average EBITDA growth is 12.1%, ranking lower than 51.08% of companies in the industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) can evaluate its profitability. Over the past 12 months, Nasdaq's ROIC was 6.08%, while its WACC was 8.18%.
Conclusion
In conclusion, Nasdaq's stock appears to be fairly valued. The company's financial condition is fair, and its profitability is strong. Although its growth ranks lower than 51.08% of companies in the Capital Markets industry, its consistent profitability and revenue growth make it a worthy consideration for investors. For more detailed financial data on Nasdaq, check out its 30-Year Financials here.
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