Nasdaq (NDAQ) Poised for Growth on Strategic Initiatives

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Nasdaq Inc . NDAQ remains well-poised given its focus on Market Technology and Information Services businesses, offering biggest growth opportunities. The company is also intensifying its focus on core special marketplace platform businesses as well as in reducing capital investment in business, which fall short of offering considerable growth for Nasdaq.  

The company's focus on ramping up its non-transaction revenue base should lend a continued support to organic growth. Management expects non-transaction revenues to grow 8-1% over the medium term.

Nasdaq's strategic acquisitions have helped it gain a direct access to the Canadian equities market, expand its technology offering, fortify its Corporate Solutions business and also improve its market surveillance techniques.

Nasdaq boasts a healthy balance sheet and a solid cash position along with modest operating cash flow from its diverse business model. This also enabled the company to witness its dividend hike at a four-year CAGR of 35.6% while engaging in regular buybacks at the same time. The company had $386 million remaining outstanding under authorization as of Jun 30, 2018.

However, escalating expenses remain a concern for Nasdaq as the company is pursuing investments in technological upgrade. Nasdaq raised the lower level of its expense guidance, projecting 2018 non-GAAP operating expenses in the range of $1,310-$1,335 million from $1,295-$1,335 billion. This in turn, represents higher incentive compensation, driven by a strong organic growth performance. Management predicts expense growth to be an average 3% over the medium term.

Given the rising expenses, the company estimates lower margins during 2018 as well as 2019 in its Market Technology compared with 20-25% levels, experienced in the past couple of years.

Stocks That Warrant a Look

Stocks in the Finance sector deserving some attention are Ameriprise Financial, Inc. AMP , American Equity Investment Life Holding Company AEL and Ally Financial Inc. Inc. ALLY .

Ameriprise Financial provides various financial products and services to individual and institutional clients in the United States and internationally.  The company came up with an average four-quarter earnings surprise of 9.53%.  

American Equity Investment provides life insurance products and services in the United States. The company delivered an average four-quarter positive surprise of 22.24%.  

Ally Financial provides various financial products and services for consumers, businesses, automotive dealers and corporate clients in the United States and Canada. The company pulled off an average four-quarter beat of 13.15%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Symbols: ALLY , AMP , AEL , NDAQ

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