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Intercontinental Exchange (ICE) on Growth Path: Time to Buy?

Intercontinental Exchange, Inc. ICE boasts being the industry-leading regulated exchange and clearing house for financial and commodity markets. The company has successfully managed to cater to market demands through efficient and effective data technology plus risk management services across the world.

Intercontinental Exchange has put in significant efforts to improve its inorganic portfolio, which in turn has accelerated the company’s overall growth. The securities exchange displays a good mix of strategic buyouts, comprising Standard & Poor’s Securities Evaluations, Inc., or SPSE, Credit Market Analysis Limited and NSX & Atrium among others. Such prudent acquisitions have not only boosted the company’s growth but have also resulted in achieving expense synergies.

In its recent endeavors, Intercontinental Exchange has agreed to acquire Global Research division’s index platform from Bank of America Merrill Lynch to ramp up its index services. It also bought the remaining 20% stake in ICE Endex shares to add capabilities to the acquirer’s European gas and power portfolio.

The Zacks Rank #2 (Buy) securities exchange has been creating and providing a wide range of products and risk management services which in turn, have enabled it to maintain a sustained operational performance.

Intercontinental Exchange displays an exemplary track record of top line growth over a considerable period of time on the back of a robust product and service suit as well as strategic buyouts. Interestingly, this securities exchange is projected to retain its revenue momentum in the coming quarters, given its strength in global data services.

Additionally, volume growth continues to drive trading and clearing segment revenues. Notably, the company also expects Data revenues to increase 6% year over year in 2017.

The securities exchange also maintains a strong capital position and engages in shareholder-friendly moves like share buybacks and dividend hikes, thereby boosting the investors’ confidence in the stock. Plus, a healthy and minimal risk-based balance sheet will continue to provide stability and buoyancy to the company over the medium to long term.

Shares of Intercontinental Exchange have rallied 16.75% year to date, outperforming the Zacks categorized Securities Exchange industry’s increase of 13.12%. We expect solid operational performance, strong volumes and a stable capital position to continue to drive the stock higher in the near term.

Furthermore, valuation is attractive at present as the stock is currently trading at a price to book multiple of 2.47, a 3.1% discount to the industry average of 2.55. Besides, the company has a trailing 12-month return on equity (ROE) of 10.7%, higher than the industry’s 9.5% average. Its expected long-term earnings growth is impressively pegged at 11.20%.

Stocks to Consider  

Investors interested in some other top-ranked stocks from the finance sector might consider Reinsurance Group of America, Incorporated RGA, Cigna Corporation CI and FBL Financial Group, Inc. FFG. Each stock carries a Zacks Rank #2. You can see _1link">the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Reinsurance Group deals in reinsurance business. The company has delivered positive surprises in three of the last four quarters with an average beat of 5.08%.  

Cigna provides insurance plus related products and services in the United States and internationally. The company has delivered positive surprises in three of the last four quarters with an average beat of 1.35%.

FBL Financial sells individual life insurance and annuity products. The company has delivered positive surprises in two of the last four quarters with an average beat of 1.98%.

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