Company Spotlight - IntercontinentalExchange (ICE-NYSE) The Futures of Trading | | NYSE: ICE $140 | The Good: Earnings are jumping, net profit margin impressive.
The Bad: Valuation is relatively high.
The Beautiful: Growth, Growth, Growth. | P/E: 45 | PSR: 20 | ROE: 41% | Debt/Eq: 0.14 | Div. Yield: 0% |
January 30, 2008 - IntercontinentalExchange Inc. (ICE-NYSE) is a leading online marketplace for global commodity trading, primarily of electricity, natural gas, crude oil, refined petroleum products, precious metals, and weather and emission credits. It also owns the ICE Futures, a leading European energy futures and options platform. ICE's 10x Group unit provides real-time market data reports, and the company's eConfirm platform provides electronic trade confirmations. In 2007 the company acquired the New York Board of Trade for $1 billion, and agreed to buy an 8% stake in India's National Commodity & Derivatives Exchange.
In the last year alone, ICE bought 5 companies. It added the New York Board of Trade this month. They're expanding into more markets and adding new exchanges. With these additions, ICE had a record year in 2007. Expectations are that revenues grew by 80% and earnings were up 44%. Look for $3.45 in earnings for 2007, up from $2.40 in 2006. This year is projected to show $4.90. Over the next 5 years, analysts predict a growth rate of 40.5% per year, on average, for earnings, while revenues gain by 26.5% a year, on average.ICE is capitalizing on its brand name. It changed the Winnipeg Commodity Exchange to ICE Futures Canada and the New York Board of Trade to ICE Futures U.S. That should help strengthen its image as the global platform for trading. Innovation is driving much of ICE's success. For example, it announced last month that ICE Futures U.S. will be completely electronic by early March. That should improve market quality, expedite growth, and be more efficient than the current operations. Look for more cost cutting in all operations to enhance margins in the months ahead. Some numbers: Revenues were $313.8 million in 2006, should be $565 million for 2007, expected to be $775 million this year. Current assets outnumber current liabilities by 1.25 to 1 with $210 million in cash. There is no dividend. Net profit margin was 45.7% in 2006, should be 44.2% in 2007 and predicted at 47.1% for this year. Market cap is $11.4 billion on 69.5 million shares. This is an expensive stock. Most growth companies are. The price has soared from $31.30 to recent high of $194.90. Now it's taking a breather. The valuation is relatively high, even using forward earnings of 2008 at $4.90 when calculating the p/e ratio (30). But it is more than 50 points off its high, and growth could be very strong. Dig deeper to get your own sense of comfort on this one. - Company Web site: www.theice.com Ted Allrich
|
Weekly Newsletter
printer-friendly format