Is ASX Ltd a buy at this share price?

The share price of share market operator ASX Ltd (ASX: ASX) has retreated by just over 3% in the past five trading sessions to currently trade at $44.

While that’s certainly not a level which screams bargain considering the exchange provider’s 52-week high is $46.31, a recent investor presentation delivered to the Global Exchange and Brokerage Conference in New York City last week did highlight many of the positive attributes of the company.

Here are seven key takeaways from the presentation…

  1. For the nine months ending 31 March 2016 the underlying profit after tax for the group was up 5.9% to $317.4 million on the back of revenue growth of 7% thanks to “robust trading activity”
  2. The Australian financial market represents the largest pool of investable funds in Asia and the seventh largest in the world
  3. Australia has the third-largest equity market in Asia and the ninth largest in the world
  4. ASX’s revenues have increased at a compound average growth rate (CAGR) of 2.6% over the past six years
  5. ASX’s profits have increased at a CAGR of 3.9% over the past six years
  6. The group’s earnings before interest, tax, depreciation and amortisation margin has remained relatively stable at 77% over the past six years
  7. Year to date (April) activity levels show a 33% increase in total capital raised, an 11% increase in cash market trading, a 7% increase in average daily futures contracts and an 18% decline in average daily equity options contracts

Foolish takeaway

ASX Ltd enjoys a market-leading position, however, it is increasingly under pressure from competitors.

According to Reuters, analyst consensus earnings per share for the year ending 30 June 2016 are 217 cents per share. This implies a price-to-earnings ratio of approximately 20 times which looks like a pretty full valuation to me.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. 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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