How To Value NYSE Euronext

Despite my use of PEG to value this company, I also look at it in practical terms. For instance, the NASDAQ has a PEG of 1.58 and the CME has a PEG of 1.84. So if the NYSE Euronext (NYX) ultimately wants to be a true global exchange combining equities and derivatives (which it kind of is with the derivative arm of Euronext), why is it trading at a PEG of 1.14?

The NDAQ may deserve a premium due to its ability to gain market share in the U.S. and the level of its efficiency, and CME gets a premium due to its position in derivatives. But why are all the positives ignored from NYX to give it such a low valuation when the company it is becoming is like a combination of NDAQ and CME?

NYX does not need to buy NYMEX Holdings Inc. (NMX) now, nor will it as NMX is going after its own acquisitions for the time being. NYX needs to prove itself to the street, and there's no better a time to do that than on Aug 2nd.

If NYX cannot pull off good earnings then it is a 2008 story, but until that is seen I still believe it is a 2007 and beyond story.

Comments

[Winston Kotzan:]

John Thain deserves the wall of shame... and I think NYX is under pressure from new competitors like CBOE/CBSX in the equities market.

2007 Jul 31 02:33 PM

[Echo To All:]

competition is always a threat, but with close to record volumes being tracked, these market places are not a threat just yet. everyone is benefiting, although i am sure if the smaller players were not in the space NYX would be doing much better on the american side of things. IMO, the naz is NYSE (American arm) biggest problem.

NYX has to prove itself on the American side (they did have good numbers last month, but one does not make a trend), maintain itself on the european side and show cost control from the merger... then hopefully nyx has a great quarter. If Thain can control these things he maybe a hero come Aug 2nd.

2007 Jul 31 03:36 PM