Bailey Pemberton
3 min read
Nasdaq, Inc. has delivered a powerful 3 year run, and that rise puts a spotlight on a simple question for investors who own or track Nasdaq stock. Do the current earnings of the business do enough to support where the share price now sits?
-
Over the past 3 years the stock has gained 84.4%, which puts real pressure on the underlying earnings story to carry more of the load for its current valuation.
-
Index related revenue growth and a stronger earnings outlook tied to financial technology services can support higher expectations, but those earnings need to be weighed carefully against what buyers are paying for each dollar of profit.
-
The analysts covering Nasdaq have run their own numbers. See what analysts think Nasdaq’s shares could be worth.
The issue now is whether Nasdaq’s present earnings are sufficient to justify today’s share price on an earnings based yardstick.
To assess whether Nasdaq’s earnings justify its recent 3-year performance, it can be useful to compare the company with others using a focused screen of 32 high quality undervalued stocks.
Is Nasdaq Getting Expensive on Earnings?
The P/E ratio suits Nasdaq because earnings remain a core yardstick for exchanges and market infrastructure groups. On this measure, the stock trades on a P/E of 26.1x, which is slightly above the peer average of 25.9x and below the wider capital markets sector on 38.1x. That mix indicates the market is pricing Nasdaq at a small premium to close comparables but below the broader industry, which includes platforms that trade on higher multiples.
Because bank earnings and inflation data have been in focus recently, sentiment across financials has been shifting quickly. Nasdaq’s current P/E still screens above the level suggested by a tailored fair multiple that weighs its growth profile, margins, size and risk. The model points to the shares looking overvalued on this earnings yardstick, so any decision to pay this multiple needs to be balanced against conviction in the durability of index revenue and financial technology income. Explore the numbers behind Nasdaq’s P/E valuation.
The Nasdaq Narrative: What Would Justify Today’s Price?
Simply Wall St Narratives pick up where Nasdaq’s valuation puzzle leaves off by spelling out which future paths for growth, margins and earnings would need to hold for the stock to be worth meaningfully more or less than it is today. They sit on the platform’s Community page for you to track. Each scenario ties a specific fair value estimate to a concrete mix of potential catalysts and risks, so you can see over time which version of Nasdaq’s story is actually unfolding in the market.
