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Reasons Why Hold Strategy is Apt for Nasdaq (NDAQ) Stock Now

Zacks Equity Research

Nasdaq, Incorporation NDAQ remains well poised for growth driven by strategic buyouts, technological expansion, solid capital position and capital deployment.

Estimates for Nasdaq have been revised upward over the past seven and 60 days, reflecting analysts’ confidence in the stock. The Zacks Consensus Estimate for earnings for 2019 has moved north by 0.2% over the past seven days and the same for 2020 earnings has moved north by 0.2% over the past 60 days.

The company has a decent earnings surprise history. It beat estimates in each of the trailing four quarters, with the average being 2.94%.

Nasdaq’s return on equity — a measure of profitability — is 15.2% in the trailing 12-month period, better than the industry average of 11.4%. This reflects the company’s prudent usage of its shareholders’ funds.

Shares of this Zacks Rank #3 (Hold) company have rallied 32.1% year to date, outperforming the industry’s increase of 19.7%.

 

Nasdaq is consistently growing on the back of a number of acquisitions, which have aided the company to gain access to the equities market in Canada, broaden its technology offering and better its market surveillance techniques. The company has acquired eVestment, Cinnober, Quandl and Center for Board Excellence (CBE) as part of its strategic acquisitions strategy to boost inorganic growth.

Nasdaq is focused on expansion of Trade Surveillance, data analytics and integrity solutions. Technological expansion with SMARTS surveillance in non-financial markets indicates the company’s focus on capitalizing on emerging opportunities in the cryptocurrency market.

Banking on solid cash position and healthy balance sheet, the company deploys capital effectively via share repurchases and dividend hikes to enhance shareholder value. Nasdaq’s dividend yield of 1.7% betters the industry average of 1.3%.

However, escalating expenses due to restructuring charges, and general and administrative expenses weigh on operating margin expansion. Also stiff competition and regulatory issues remain key concerns for Nasdaq.

The Zacks Consensus Estimate for 2019 and 2020 earnings per share is pegged at $4.97 and $5.42, indicating year-over-year increase of 2.7% and 9.2% respectively. The expected long-term earnings growth rate is 9%,  better than the industry average of 8.9%.

Stocks to Consider

Some better-ranked finance stocks are QIWI PLC QIWI, Cardtronics PLC CATM and Global Payments Incorporation GPN. While QIWI and Cardtronics sport a Zacks Rank #1 (Strong Buy), Global Payments carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Qiwi operates electronic online payment systems through Payment Services, Consumer Financial Services, Small and Medium Enterprises and Rocketbank segments. The company beat earnings estimates in three of the last four reported quarters, the average being 72.30%.

Cardtronics provides automated consumer financial services through its network of automated teller machines and multi-function financial services kiosks. Its average four-quarter positive surprise is 28.80%.

Global Payments provides payment technology and software solutions for card, electronic, check, and digital-based payments. The company beat the Zacks Consensus Estimate in the trailing four quarters, the average being 2.42%.

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