ASX Ltd share price sinks 3.7% – Is it a bargain?

What: The share price of stock exchange operator ASX Ltd (ASX: ASX) is down 3.7% at midday on Friday as investors around the globe remove risk from their portfolios.

Overnight on Wall Street the Dow Jones lost 1.4%, while in Europe the FTSE slumped 2.2% and the DAX plunged 3.6%.

The S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has followed the offshore leads today to trade 1.8% lower at lunchtime.

So What: Given ASX Ltd’s leverage to equity markets it is understandable that the stock has fallen more than the index today in response to the market-wide slump. With the share price well off its 52-week high however, the stock could now be worth a closer look.

Here’s what investors learned this week about the group’s November trading activity:

  • In November $7.9 billion of capital was raised
  • The average daily number of trades was 21% higher than the prior corresponding period (pcp)
  • The average daily value traded on-market was 15% higher than the pcp at $4 billion
  • The average daily future and options on futures volume increased 28% on the pcp

Now What: With a monopoly and near monopoly position in the provision of numerous domestic security exchange services, the ASX offers investors exposure to a business model with an entrenched and compelling competitive advantage.

Based on consensus data supplied by Morningstar, the company is forecast to earn 217.6 cents per share (cps) in financial year 2016 and pay a dividend totalling 195.9 cps.

With the stock down as low as $40.51 this morning, these forecasts imply an appealing looking forward price-to-earnings ratio and fully franked yield of 18.6x and 4.8% respectively.


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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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