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Quality ICE, But Pricey

Edgar Torres H profile picture
Edgar Torres H


  • ICE's business continues to hit on all cylinders based on their last annual report.
  • Organic growth and acquisitions will drive ICE to become a prominent player in a consolidating market.
  • Both business segments are high-grade, although Trading and Clearing seems to be more profitable.
  • I value both segments separately and come up with a range of valuations for ICE.
  • The valuation model suggests that ICE is currently close to fair value, and I recommend a $60-$65 entry.


Intercontinental Exchange, Inc. (NYSE: NYSE:ICE) is a holding Company. It consists of a bunch of different subsidiaries that it has acquired through the years. With these acquisitions is provides stock exchange related services, products, infrastructure, clearing and data services.

Source: ICE 2017 Anual Report.

It continues to provide growth for its shareholders through investment in organic growth and acquisitions. So management's ability to recognize and seize expansion opportunities through acquisitions and strategic alliances will remain of vital importance going forward. So far they have managed to perform up to expectations.

In fact, ICE keeps gobbling up smaller exchanges and competitors as a means of expansion. This strategy serves threefold, 1) it eliminates competition, 2) it consolidates pricing power, 3) it opens up new markets (like with the Chicago exchange deal, it might open up national exchange securities licensing, which ICE can use through NYSE).

Another example of growth through acquisitions was the purchase of Bond Point from Virtu Financial. ICE bought the firm to provide liquidity and better executions in their fixed income services. Virtu Financial is known for their market making algorithms, and Bond Point most likely offers some of those capabilities to ICE and its subsidiaries. All in all, it is an expanding financial empire that somehow flies under the radar of most investors.


“ICE is the leading global operator of regulated exchanges, clearing houses and listing venues, and a provider of data services for commodity, fixed income and equity markets.”

Source: ICE 2017 Anual Report.

They offer support, Pre-Trade, during Trade, and Post-Trade. Desktop and Connectivity solutions help users Pre-Trade, and then their Exchange Data, Pricing, and Analytics helps investors with their Trades and Post-Trade support.

Source: ICE 2017 Anual Report.

Broadly speaking the company operates in two distinct segments, both of them are

This article was written by

Edgar Torres H profile picture
Follow me for analyses of undercovered/overlooked stocks. My takes are based on numbers but without completely ignoring the underlying story. I'm not uncomfortable holding unpopular opinions, nor do I seek them. I just want to get as close to the truth as possible.I've been an Investor for over nine years. I write to structure my thoughts. I worked on my country's stock exchange as an analyst for private debt prospectus. I worked as a sell-side analyst and also as a broker. I love the markets and everything related, and now I’m able to be a full-time investor. I'm very grateful for this. I hope my comments/articles are of use to someone else. - "Veritas Super Omnia."

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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