Does Nasdaq (NASDAQ:NDAQ) Deserve A Spot On Your Watchlist?

By
Simply Wall St
Published
January 03, 2022
NasdaqGS:NDAQ
Source: Shutterstock

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In contrast to all that, I prefer to spend time on companies like Nasdaq (NASDAQ:NDAQ), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Nasdaq

How Fast Is Nasdaq Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. We can see that in the last three years Nasdaq grew its EPS by 15% per year. That's a pretty good rate, if the company can sustain it.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The good news is that Nasdaq is growing revenues, and EBIT margins improved by 2.6 percentage points to 27%, over the last year. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

earnings-and-revenue-history
NasdaqGS:NDAQ Earnings and Revenue History January 3rd 2022

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Nasdaq's future profits.

Are Nasdaq Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$35b company like Nasdaq. But we do take comfort from the fact that they are investors in the company. Notably, they have an enormous stake in the company, worth US$166m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Is Nasdaq Worth Keeping An Eye On?

One positive for Nasdaq is that it is growing EPS. That's nice to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. We should say that we've discovered 2 warning signs for Nasdaq (1 is significant!) that you should be aware of before investing here.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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