The network of regulated exchanges and clearing houses for financial and commodity markets demonstrates solid growth but less upside, analysts said.
"Amid integration of NYX, ICE remains a solid EPS growth story with substantial cost takeout, continued exchange franchise build via acquisitions and organic initiatives, and strong free cash flow generation," analysts said.
"However, with ICE shares up 12% since our October 1 upgrade, we think the NYX expense saves and revenue synergies are now largely factored into the valuation and we view further major upside in the shares as more dependent upon volume growth (in what remains a less volume centric story than peers CME)," analysts added.
Shares of Intercontinental Exchange closed down 0.02% at $217.42 yesterday.
Separately, TheStreet Ratings team rates INTERCONTINENTAL EXCHANGE as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate INTERCONTINENTAL EXCHANGE (ICE) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels, increase in net income, increase in stock price during the past year and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ICE's very impressive revenue growth greatly exceeded the industry average of 11.3%. Since the same quarter one year prior, revenues leaped by 197.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Diversified Financial Services industry average. The net income increased by 45.8% when compared to the same quarter one year prior, rising from $141.32 million to $206.00 million.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- The gross profit margin for INTERCONTINENTAL EXCHANGE is rather high; currently it is at 57.85%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, ICE's net profit margin of 20.47% compares favorably to the industry average.
- You can view the full analysis from the report here: ICE Ratings Report