Wall Street Addict

NYSE has a $13 billion market cap but $1 billion in cash and no debt, leaving it with an enterprise value of roughly $12 billion. Its balance sheet is extremely healthy, particularly when compared with a competitor like Nasdaq Stock Market (NDAQ), which has $2 billion in cash but more than $1.5 billion in debt and lower cash flows -- $341 million in earnings before interest, taxes, depreciation and amortization -- with which to pay that debt.
NYSE has EBITDA of $1 billion, and that number is expected to see a double-digit rise over the next year. Its enterprise-value-over-EBITDA multiple of just 11 puts it in potential buyout territory. Now I don't believe NYSE will get acquired, but if at any point it can't find accretive acquisitions, it would make sense for it to use cash to buy back shares at these levels, particularly since it can leverage up at 6% and buy back shares with an earnings yield of almost 10%. Every hedge fund and buyout fund, incidentally, looks at those types of numbers as well.
Earnings are expected to climb from $1.64 a share in 2006 to $2.48 in 2007 and $3.37 in 2008. The only other place I see that kind of growth with a market cap this big is on Google (GOOG).
Last week, large NYX shareholder Atticus Capital took a 4% stake in the Bombay Stock Exchange. This deal underlines how in our trade-deficit reality, one of our biggest exports is the U.S. expertise in financial services and innovation. NYSE Euronext is quietly becoming the world's financial marketplace. It's a 50-year game plan that will win. Atticus Capital, which is one of Cramer's favorite hedge funds, understands this implicitly and has been placing its bets.
Disclosure: We own stock options on NYX

Labels: NYSE Euronext, NYX