Intercontinental Exchange (ICE) is back in focus after U.S. regulators eased restrictions on perpetual futures, a shift that could increase competition even as the company reports strong July trading activity and active bond issuance.

The regulatory shift around perpetual futures has put some pressure on Intercontinental Exchange. However, the stock has recently picked up momentum, with a 30 day share price return of 10.80% and a 3 year total shareholder return of 41.25%, in contrast to a 1 year total shareholder return decline of 13.52%.

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Bulls point to Intercontinental Exchange's recent trading momentum and fixed income activity. Bears focus on new perpetual futures competition and a weaker 1 year return. Which side do current valuation metrics appear to support?

Most Popular Narrative: 15.9% Undervalued

Intercontinental Exchange's most followed valuation narrative puts fair value at $183.93, above the recent $154.73 close. This frames the current debate around perpetual futures pressure and recent trading strength.

The continued expansion and integration of ICE's global electronic trading platforms across asset classes including record energy, interest rate, and equity contract volumes suggests ongoing benefits from digitization and greater market electronification, which are likely to drive sustained double-digit growth in transaction revenues and operating leverage.

Read the complete narrative. Read the complete narrative.

Want to see what is sitting behind that growth story for Intercontinental Exchange? The narrative leans heavily on recurring data revenues, margin resilience, and a richer earnings mix. It explores which future revenue path and profit profile are required to justify that higher fair value and the premium earnings multiple implied.

Result: Fair Value of $183.93 (UNDERVALUED)

However, the Intercontinental Exchange narrative could be challenged if new perpetual futures rivals pressure trading fees or if mortgage technology clients reassess long term commitments.

Another View on Intercontinental Exchange's Valuation

The first narrative presents Intercontinental Exchange as about 15.9% undervalued using analyst growth assumptions and a future P/E of 28x. Our DCF model tells a different story. It puts fair value at $80.66, well below the recent $154.73 share price, which screens as overvalued using that approach. Which framework do you find more useful for a long term view?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Intercontinental Exchange for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 52 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With mixed signals around Intercontinental Exchange's valuation and outlook, this is a good time to review the underlying data, weigh both sides, and move quickly to shape your own view by checking the 5 key rewards and 2 important warning signs.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.