Is Intercontinental Exchange Stock Priced Right After Recent Energy Futures Expansion?

• Wondering if Intercontinental Exchange might be a hidden value opportunity, or if its price already reflects all the good news? Let’s dig into the numbers to find out where the truth lies.
• The stock has seen a modest 1.7% gain in the last week. With a year-to-date return of 4.7% and 56.4% growth over the past five years, there is more beneath the surface than meets the eye.
• Recent headlines have highlighted Intercontinental Exchange’s expansion of its energy futures suite and new strategic partnerships. Both of these moves underscore the company’s efforts to strengthen its core business amid changing market dynamics, providing important context for the market’s evolving view of the company’s risk and growth prospects.
• When it comes to valuation, the company checks the box for being undervalued on just 2 out of 6 key measures, earning it a 2/6 score in our quick view. Next, we will break down how different valuation methods look at Intercontinental Exchange before exploring the smarter way to really make sense of the numbers.

Intercontinental Exchange scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Intercontinental Exchange Excess Returns Analysis

The Excess Returns valuation model focuses on how much profit a company generates above its cost of equity, with particular attention to return on invested capital and growth projections. This approach aims to reveal whether the business consistently creates value for shareholders from the capital invested in the company.

For Intercontinental Exchange, the analysis provides the following insights:

• Book Value: $50.25 per share
• Stable EPS: $7.18 per share (Source: Weighted future Return on Equity estimates from 5 analysts.)
• Cost of Equity: $4.24 per share
• Excess Return: $2.94 per share
• Average Return on Equity: 14.60%
• Stable Book Value: $49.19 per share (Source: Weighted future Book Value estimates from 4 analysts.)

This model estimates the intrinsic value of Intercontinental Exchange at $104.11 per share. Compared to the current share price, this suggests the stock is 50.1% overvalued. This significant gap indicates that the current market price may already reflect a high level of optimism about future returns, placing the shares on the expensive side relative to their fundamental value.

Result: OVERVALUED

Our Excess Returns analysis suggests Intercontinental Exchange may be overvalued by 50.1%. Discover 927 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Intercontinental Exchange.

Approach 2: Intercontinental Exchange Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used tool to value established, profitable companies like Intercontinental Exchange. It gauges how much investors are willing to pay per dollar of earnings, offering a straightforward way to assess whether a stock is expensive or reasonably priced given its profit generation.

Growth expectations and perceived risks both play critical roles in what constitutes a “fair” PE ratio. Typically, companies with faster expected growth or lower risks command higher PE multiples. In contrast, slower-growing or riskier firms often have a lower ratio.

Currently, Intercontinental Exchange trades at a PE ratio of 28.2x. This is higher than the Capital Markets industry average of 23.5x and also above its peer group average of 33.3x. Although this may suggest a premium valuation, these benchmarks do not account for company-specific dynamics.

Simply Wall St’s proprietary “Fair Ratio” offers a benchmark by taking into account growth, profit margins, risk, industry drivers, and company size. It indicates the PE multiple Intercontinental Exchange would be expected to have under current conditions. For ICE, this Fair Ratio is 16.4x, meaning the stock’s current PE is significantly above the level justified by its fundamentals and outlook.

Because the actual PE multiple is well above the Fair Ratio, this approach suggests that Intercontinental Exchange is trading at a premium relative to what would be considered fair value by these deeper-quality measures.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1433 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Intercontinental Exchange Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. Narratives are a simple, accessible way to provide your own perspective on a company. Think of them as the “story” behind the numbers, where you set out your expectations for Intercontinental Exchange’s future revenue, earnings, profit margins, and the fair value those forecasts justify.

Rather than focusing only on fixed valuation models, Narratives connect what you believe about Intercontinental Exchange’s business drivers to a financial forecast, which then generates a fair value estimate unique to your view. Available to millions of investors through the Simply Wall St Community page, Narratives empower you to compare your fair value with the current share price in real time, making it easier to decide when to buy or sell.

A major strength of Narratives is their dynamic nature. They update automatically when new information or company developments occur, so your investment thesis stays relevant. For example, one investor might use strong data growth and recurring revenues to support a bullish price target of $227 per share, while another, concerned about rising competition and regulatory risk, projects a more cautious value near $170. Narratives help you invest with conviction by showing you exactly how your expectations stack up against the market and other investors’ perspectives.

Do you think there's more to the story for Intercontinental Exchange? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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