Euronext Stock Analysis – Too Expensive Even if Good Business

Euronext stock is very interesting because it represents a stock exchange. Stock exchanges usually have moats as the companies listed rarely change listings and given the current financial environment with loose monetary policies, we can expect more money to be traded globally.

Let’s take a look at Euronext stock; the business, financials and investment thesis.

This Euronext stock analysis is part of my complete research on the Amsterdam stock exchange, stock by stock (you can check many more analyses there). My goal is to learn about as many businesses that I can find and then select those that I think can offer interesting, low risk and high reward investment opportunities over time. I run a Stock Market Research Platform where my job is to follow and cover the best businesses out there and to find the best times to invest in those.

Euronext Stock Price Overview

Euronext stock did remarkably well over the last years, being up more than 5x as stock exchange stocks became market darlings over the past years.

Euronext Stock Price Historical Chart
Euronext Stock Price Historical Chart

But, we are not here for the market’s sentiment, we are here for how much money the company makes for us and what is the long-term outlook.

The market cap is 10 billion and the stock is traded on all Euronext exchanges, of course!

Euronext Stock Analysis – Business Overview

Euronext operates exchanges in Belgium, Frances, Ireland, Italy, the Netherlands, Norway and Portugal alongside having activities in another 16 countries. They provide market data, derivatives and the combined market capitalization of listed securities is 5.6 trillion EUR.

Euronext business overview – Source: Euronext
Euronext business overview – Source: Euronext

The business is growing thanks to the consolidation of Borsa Italiana and thanks to all the listings that the SPAC mania has brought alongside increased general activity on financial markets.

Euronext Stock Analysis – Financials

Revenue has been growing steadily over the past years but those were flat from 2011 to 2016. This means we have to expect flatness again in the future and that is something the market doesn’t like at all.

Euronext Stock Financials – Source: Morningstar
Euronext Stock Financials – Source: Morningstar

When it comes to businesses I only care about how much value it creates. Such an attitude quickly eliminates most businesses but leads me to the few that are really interesting. Euronext made 300 million EUR in free cash flow over the last 12 months.

Euronext Stock Analysis – Investment Conclusion

That is a 3% FCF yield which simply doesn’t cut it for me because to get to a minimum 12% business yield the business has to grow 4 times. They might do it over 20 years, but if then interest rates are higher, the stock might still be where it is now. Thus, not much to think here, no matter the fact that there is nothing wrong with the business, even if the are pushing a bit on the debt side, time will tell if too much.