Company Profile (excerpt from Reuters): Nasdaq, Inc. (Nasdaq), incorporated on November 13, 1979, is a holding company. The Company is a provider of trading, clearing, exchange technology, regulatory, securities listing, information and public company services. The Company manages, operates and provides its products and services through four segments: Market Services, Corporate Services, Information Services and Market Technology. Its global offerings include trading and clearing across various asset classes, trade management services, data products, financial indexes, capital formation solutions, corporate solutions, and market technology products and services. Its technology powers markets across the globe, supporting equity derivative trading, clearing and settlement, cash equity trading, fixed income trading and various other functions.
Downloadable PDF version of this valuation:
ModernGraham Valuation of NDAQ – February 2019
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
What kind of Intelligent Investor are you?
| Defensive Investor; must pass 6 out of the following 7 tests. | ||||
| 1. Adequate Size of the Enterprise | Market Cap > $2Bil | $14,326,562,209 | Pass | |
| 2. Sufficiently Strong Financial Condition | Current Ratio > 2 | 0.97 | Fail | |
| 3. Earnings Stability | Positive EPS for 10 years prior | Pass | ||
| 4. Dividend Record | Dividend Payments for 10 years prior | Fail | ||
| 5. Earnings Growth | Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end | 97.70% | Pass | |
| 6. Moderate PEmg Ratio | PEmg < 20 | 24.88 | Fail | |
| 7. Moderate Price to Assets | PB Ratio < 2.5 OR PB*PEmg < 50 | 2.64 | Fail | |
| Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor. | ||||
| 1. Sufficiently Strong Financial Condition | Current Ratio > 1.5 | 0.97 | Fail | |
| 2. Sufficiently Strong Financial Condition | Debt to NCA < 1.1 | -14.78 | Fail | |
| 3. Earnings Stability | Positive EPS for 5 years prior | Pass | ||
| 4. Dividend Record | Currently Pays Dividend | Pass | ||
| 5. Earnings Growth | EPSmg greater than 5 years ago | Pass | ||
Stage 2: Determination of Intrinsic Value
| EPSmg | $3.51 |
| MG Growth Estimate | 7.56% |
| MG Value | $82.94 |
| Opinion | Fairly Valued |
| MG Grade | D |
| MG Value based on 3% Growth | $50.93 |
| MG Value based on 0% Growth | $29.86 |
| Market Implied Growth Rate | 8.19% |
| Current Price | $87.38 |
| % of Intrinsic Value | 105.36% |
Nasdaq Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.
As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.34 in 2015 to an estimated $3.51 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 8.19% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.
At the time of valuation, further research into Nasdaq Inc revealed the company was trading above its Graham Number of $61.15. The company pays a dividend of $1.7 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 24.88, which was above the industry average of 20.29. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-23.59.
Nasdaq Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.
Stage 3: Information for Further Research
| Net Current Asset Value (NCAV) | -$23.59 |
| Graham Number | $61.15 |
| PEmg | 24.88 |
| Current Ratio | 0.97 |
| PB Ratio | 2.64 |
| Current Dividend | $1.70 |
| Dividend Yield | 1.95% |
| Number of Consecutive Years of Dividend Growth | 7 |
Useful Links:
| ModernGraham tagged articles | Morningstar |
| Google Finance | MSN Money |
| Yahoo Finance | Seeking Alpha |
| GuruFocus | SEC Filings |
Most Recent Balance Sheet Figures
| Balance Sheet Information | 12/1/2018 |
| Total Current Assets | $6,370,000,000 |
| Total Current Liabilities | $6,570,000,000 |
| Long-Term Debt | $2,956,000,000 |
| Total Assets | $15,700,000,000 |
| Intangible Assets | $8,663,000,000 |
| Total Liabilities | $10,251,000,000 |
| Shares Outstanding (Diluted Average) | 164,500,000 |
Earnings Per Share History
| EPS History | |
| Next Fiscal Year Estimate | $5.00 |
| Dec2018 | $2.73 |
| Dec2017 | $4.33 |
| Dec2016 | $0.64 |
| Dec2015 | $2.50 |
| Dec2014 | $2.39 |
| Dec2013 | $2.25 |
| Dec2012 | $2.04 |
| Dec2011 | $2.15 |
| Dec2010 | $1.91 |
| Dec2009 | $1.25 |
| Dec2008 | $1.55 |
| Dec2007 | $3.46 |
| Dec2006 | $0.95 |
| Dec2005 | $0.57 |
| Dec2004 | -$0.02 |
| Dec2003 | -$1.45 |
| Dec2002 | $0.40 |
| Dec2001 | $0.35 |
| Dec2000 | $0.21 |
| Dec1999 | $0.86 |
Earnings Per Share – ModernGraham History
| EPSmg History | |
| Next Fiscal Year Estimate | $3.51 |
| Dec2018 | $2.69 |
| Dec2017 | $2.58 |
| Dec2016 | $1.79 |
| Dec2015 | $2.34 |
| Dec2014 | $2.22 |
| Dec2013 | $2.06 |
| Dec2012 | $1.91 |
| Dec2011 | $1.91 |
| Dec2010 | $1.80 |
| Dec2009 | $1.69 |
| Dec2008 | $1.70 |
| Dec2007 | $1.42 |
| Dec2006 | $0.30 |
| Dec2005 | -$0.03 |
| Dec2004 | -$0.25 |
| Dec2003 | -$0.22 |
Recommended Reading:
Other ModernGraham posts about the company
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Disclaimer:
The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.
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