Trading activity has been increasing in recent years as more and more people are participating in the investment markets. Sites like Robinhood, Webull, and others are attracting new participants with fractional share trading and no commissions. This increase in trading volume is helping the exchanges increase revenue and raise awareness about other services they provide. Nasdaq, Inc. (NASDAQ:NDAQ) has seen its revenue grow by 6% per year over the last three years.
The company is set to report third-quarter earnings results before the market opens on Wednesday, and analysts are looking for the growth trend to continue. Revenue is expected to increase by 9.7% while earnings are expected to grow by 14.2%.
The current consensus estimate is for EPS of $1.45 on revenue of $688 million. Earnings came in at $1.27 per share in the third quarter of 2019 with revenue coming in at $632 million.
Earnings jumped 26% in the second quarter compared to the previous year and revenue was up 32%. Earnings have grown at a rate of 12% per year over the last three years, and as I mentioned earlier, revenue has increased by 6% per year. Current expectations are for earnings growth of 18.6% for 2020 as a whole, and revenue is expected to grow by 9.7%.
Nasdaq’s return on equity is average at 15%, but the profit margin is above average at 26.4%. The current valuations show a trailing P/E of 26.9, and the forward P/E is at 22. The company does pay a dividend, and the current yield is 1.5%.
Overall, the fundamental picture for Nasdaq is good. The company has been able to grow earnings and revenue in recent years, and both growth rates spiked in the second quarter. The management efficiency measurements are good, and the valuations aren’t too high.