NYSE Euronext: From Overvalued to Value Play

The market is having a horrendous year; today, it’s wrapping up one of the worst months in stock market history. The stock of exchange operator NYSE Euronext (NYSE: NYX  ) haven’t been spared -- it’s lost almost 70% of its value with respect to its 52-week high. That carnage has sown the seeds of opportunity for patient investors.

The underlying business remains strong; as evidence of this, I’d like to enter into the record NYSE Euronext’s third-quarter results, which were announced this morning. The market-jury was swayed: As I write this, the stock is up more than 8%, with the broader market up around 2%.

Including non-recurring items, quarterly revenue increased 16% over the prior-year quarter (market volatility has lifted trading volumes nicely), while diluted earnings per share fell 4% to $0.72.

In this unprecedented environment, some investors must wish John Thain were still at the helm. Thain, who came from Goldman Sachs (NYSE: GS  ) , skillfully transformed the NYSE before going on to save Merrill Lynch (NYSE: MER  ) through a sale to Bank of America (NYSE: BOA  ) . Not to worry, though -- the current CEO, Duncan Niederauer, was Thain’s protegee and is a former Goldman executive, too.

Place your CDSs on the counter
Volatility isn’t the only opportunity for exchanges right now. Mounting fears and scrutiny of the $55 trillion over-the-counter credit default swap (CDS) market -- CDSs were instrumental in sinking insurer AIG (NYSE: AIG  ) -- create huge opportunity for exchange operators that can offer solutions in terms of centralized clearing of trades and counterparty risk management. As the owner of European derivatives exchange LIFFE, NYSE Euronext is part of that conversation (along with firms such as CME Group (Nasdaq: CME  ) ).

From overvalued to value play
As I see it, NYSE Euronext’s stock has spent much of the last two years being substantially overvalued. Now is not one of those times: With the most pessimistic analyst calling for the company to earn $2.99 next year, the stock looks positively attractive at approximately 10 times that estimate. On that narrow basis, it even outshines its sprightly rival, Nasdaq OMX (Nasdaq: NDAQ  ) .

More credit-crisis Foolishness:

What now? The Motley Fool is here to answer your questions about this financial crisis. Send us an email at AsktheFool@fool.com, and check back at Fool.com as we answer your questions and cover the latest on the Panic of 2008.

Alex Dumortier, CFA, has no beneficial interest in any of the companies mentioned in this article. Bank of America is a Motley Fool Income Investor selection. Nasdaq OMX Group is a Motley Fool Inside Value pick. NYSE Euronext is a Motley Fool Rule Breakers recommendation. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 767523, ~/Articles/ArticleHandler.aspx, 12/21/2014 10:17:32 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement