IntercontinentalExchange Inc Stock Analysis
The IntercontinentalExchange Inc stocks are one of the best ways to invest in the stock exchange – simply purchase shares of the exchange itself. This investment idea is not directly related to the stock exchange operator. The core areas of operation include the securities exchange, fixed income, and mortgage technology.
IntercontinentalExchange, Inc is a regulated operator of global markets, including futures exchanges, over-the-counter (OTC) markets, stock exchanges, and clearinghouses. The company trades energy and agricultural products, as well as commodities, in its trading platforms. Additionally, it engages in credit default swap (CDS) transactions, stock index contracts, and currency contracts.
The company started its operations in 2000 as an energy commodities trading platform in the OTC market. Since then, the company has been expanding organically and acquiring other exchanges. Currently, it oversees the regulated futures markets for energy commodities through its subsidiary companies, ICE Futures Europe and ICE Futures U.S.
ICE Futures Europe is the largest energy commodities futures exchange outside the United States. Agricultural products and financial futures are traded on ICE Futures U.S. exchange. In Canada, agricultural product futures are traded on ICE Futures Canada exchange. Clearing services are operated through ICE Clear Europe, ICE Clear U.S., and ICE Clear Canada companies.
Income by sectors:
IntercontinentalExchange Inc Finance
The company’s average annual revenue growth over a 10-year period reaches an impressive 21.60%. This is a very good growth rate, but it was due to a surge in the company’s expansion efforts. In the last financial year, the revenue growth was 5.10%, which is also a good increase.
Despite the high and stable (around 70%) overall profitability, the Net Income significantly deteriorated in the financial year 2022. However, it’s important to note that the company includes investment gains and losses, currency exchange results, and other expenses in its costs. For example, in 2022, the company recorded a depreciation of 1.4 billion in its Profit/Loss statement related to the investment in Bakkt company.
Net margin remained relatively high and satisfactory at 15.50%. However, the decreasing trend in EPS over the 10 and 5-year periods became negative, averaging around -10% annually.
The company is a stable cash flow generator. The Free Cash Flow (FCF) dynamics are consistently growing. In the market, investors are willing to pay around 20 USD for 1 FCF dollar. The average annual growth rate of retained earnings over a 10-year period was a remarkable 19.54%. However, profitability suffered due to a decreased EPS, resulting in a negative figure of -19%.
The average Return on Average Equity (ROAE) over a 10-year period is about 11%, which is a good return, although it has decreased due to investments. The average Return on Average Assets (ROAA) is only 0.77%. However, it is difficult to achieve higher profitability with a large amount of assets.
If the owners of the company wanted to sell shares and invest in the U.S. 10-year GDP today (at the time of writing) and receive the same return as the company provided in 2022, they should sell the shares even at $53.
Income Forecast:
The biggest risks to income are the prime interest rate, foreign exchange rate risk, and credit risk. A 50% reduction in the prime interest rate would allow the company to receive up to 21 million USD in pre-tax income.
| Forecast | 2023 | 2024 |
|---|---|---|
| EPS | 4.42 | 4.62 |
| Net Profit | 2 481 000 000 | 2 600 000 000 |
| Revenue | 9 900 000 000 | 10 400 000 000 |
Investment Scoreboard:
The IntercontinentalExchange Inc Stocks
The company’s stocks are listed on the NYSE stock exchange. The ticker is ICE.
The company has its own Share Buyback and Dividend Payment programs. The dividend growth rate over a period of 10 years averages a substantial 9.90% annually. At the time of writing, the dividend yield is only 1.45%. However, if you bought shares at the time of the announcement, the dividend yield on your holdings would already be 4.05%.
The stock price had a Standard Deviation of about 16%. These are average risk fluctuations. The Beta was almost equal to 1. The stock is very suitable for long-term investment.
Given the revenue results of 2022 as they are, the stock in the market is overvalued (at the time of writing), despite the fact that the price has been correcting for the second consecutive year. The stock’s PEG (Price/Earnings to Growth) ratio is negative. The Equity Risk Premium indicator is also negative at -0.67%. Therefore, in the medium term, investments will not outpace inflation.
The GRAPES method calculated the price perspective, indicating the overvaluation of the stock in the market. Our method’s calculated price perspective is more optimistic. Possible price growth in the perspective can range from 6-15% on average each year. The result is very close to historical indicators.
Price Chart
Conclusion
When we bought shares of this company, their dividend yield was less than 1%. The price we paid remained the same, but the dividends increased. As a result, our dividend yield is now over 4%. The paper return is around 190% or an average of 11% annually. Therefore, we have a very good company for a long-term portfolio. And if an opportunity arises, we will continue to buy more of these shares.
Will you also wait for a bigger discount? You might not have to. But it’s worth starting to buy in small quantities already, while the investment value indicates that the stock is fairly priced in the market.