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ICE: A Buying Opportunity


  • The Momentum Growth Quotient for the company is 15.56, which is 55.00% higher than the average for the S&P 100.
  • Shares present a forward rate of return of 23.22% at current price.
  • New strategic initiatives will expand the company's market share and drive revenues higher.
  • ChartMasterPro upward target price of $80.00.

Shares of Intercontinental Exchange Inc. (NYSE:ICE) are down 5.50% since peaking on June 26, 2018, and in my opinion, the shares of this electronic market-exchange for commodities, foreign currencies, and interest rate products are a value buy right now. The company has a solid history of generating strong earnings growth, and the future growth ratios point to accelerated growth over the next twelve months. I lay out my bullish argument for the company below by reviewing some pertinent fundamental and technical aspects of the stock.

Momentum Growth Quotient

Over the last few months, I have developed a new approach for my fundamental analysis of stocks: the Momentum Growth Quotient (MGQ). The MGQ is the key metric that I use to gauge the financial health of a company and its potential future growth prospects. The MGQ is calculated using the following company financial data:

  1. EBITDA growth trend over the last 10 years
  2. Operating Margin %
  3. Operating Margin % 5-year average
  4. Normalized free cash flow over the last 7 years
  5. Forward P/E
  6. Forward Rate of Return

The goal is to generate a single number, which summarizes the relative fundamental strength and future growth prospects for a company compared to an index. For the index, I use the S&P 100 - this index provides a wide swath of companies from different industries representative of the broad US economy. I update the Momentum Growth Quotient for each company in the S&P 100 every month and then use the average quotient as my baseline to compare the relative financial strength of individual companies.

As of the end of July 2018, the average MGQ for the S&P 100 was 10.04. So, if a company has an MGQ of 12.00, its individual future growth prospects are around 20% higher than the index. If a company has an MGQ of 8, its future growth

This article was written by

ChartMasterPro profile picture

ChartMasterPro is a trading service which focuses both on the fundamental and technical analysis of stocks and equity markets. I use a proprietary trading model to trade Call and Put Options on US equities. I've been trading options for 15 years and have made all the trading mistakes that could possibly be made, but as Winston Churchill once said: "Success is the ability to go from one failure to another with no loss of enthusiasm." And by the way, the name is John, John DiCecco. I'm excited to announce that I now offer a MarketPlace service in partnership with SeekingAlpha called The Options Trader - if you like trading options, check it out.

Analyst’s Disclosure: I am/we are long ICE. 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.

Note I allocate 3% of my portfolio to each option trade. To review the performance of my past trades please see my Blog Posts.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (11)

ChartMasterPro profile picture
I just sold my ICE 21SEP18 70 call options at $6.00 for a 76.47% gain on the trade.

This trade took a while to get going with the shares grinding sideways for two weeks around the $73.50 level. They broke bullish on August 27 and posted five consecutive UP days. It looks like they may pause at the $76.00 level, so I booked my profits.
Ian Farbrother profile picture
Nice! I had picked up a Sep 72.5 strike call on 8/14. Also sold it yesterday (for the same reason) for a very nice gain of 64% ;-)

Cheers, Ian
ChartMasterPro profile picture
Hi Robert,

I don't use moving averages - I find them to be lagging indicators. Instead, I draw trendlines - these tend to give more reliable trend signals.

In regards to how I calculate leverage on an option, the formula is simple: Stock Price x Option Delta/Option Price. This gives you the approximate leverage on an option. I've found it to be pretty accurate over the years.

Robert.from.Ct profile picture
Thanks John,I have much to learn
Ian Farbrother profile picture
Very interesting - thanks John.

I had been thinking that it might be useful to figure out how much leverage I have in my portfolios from options - but hadn't been able to figure out how to calculate it !!!!

Now all I have to do is remember how much my socks cost - just kidding ;-)

Cheers, Ian
Robert.from.Ct profile picture
@ChartMasterPro do you ever use moving averages in your analysis?

also how do you figure the leverage of your option trade---sorry I am just learning options,thats why I am now following

yardbird99 profile picture
I was just thinking the same things. I like CME too, and NDAQ, although NDAQ is not attractively priced like ICE. What I like about these companies is that they do well even (and especially!) in a financial downturn. People trade more during periods of volatility.
SuperPac profile picture
During the financial crisis of 2007-09, ICE's stock dropped from a high of $38 to 11, a calamitous drop of 70%. It took more than 4 years to recover to the level of 38 again. If a crisis of similar proportion strikes financial markets again, a 50% to 70% drop is not beyond the realm of possibility. Having said that, I am long ICE and I would use such a drop to load up more and increase my position.
yardbird99 profile picture
Thanks for pointing that out, SuperPac. I was not aware that ICE suffered so bad during the 2007-9 crisis. I would guess, however, that the price action in that case was due to the particular nature of the crisis, in which any and all financial institutions and instruments were considered high-risk. I still think that ICE has the potential to outperform the market in most kinds of downturns.
SuperPac profile picture
''...that the price action in that case was due to the particular nature of the crisis, in which any and all financial institutions and instruments were considered high-risk.''

You are absolutely right.

Also, ICE is a great stock to buy and hold for the very long term.
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