Intercontinental Exchange, Inc. (ICE)

Total return at 5 years: 13.2%/year = 12.0% appreciation + 1.3% dividend. The target price ($285) is ex-dividend; the $13 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $254 · Multiples $240) exceeds the market price ($162).

Today — fairly valued: at $162 trades ~32.5% below its value discounted to today (~$240); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — Infravalorado: the target price ($285) plus dividends yield above the required average return (10%) — the business compounds.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$150.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($162) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-1.6%/year) than we project (7.0%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$4.9 bn of owner earnings in year 5 (vs ~$7.5 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). Cash accumulates the retained surplus —what is not returned as dividend or buyback—, so that EV falls and multiples compress going forward. The valuation is done on EV/EBIT — suma de las partes (Exchanges, Fixed Income and Data Services, Mortgage Technology). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Sum-of-the-parts model: each segment is projected with its own revenue and operating margin trajectory, and valued with its own terminal EV/EBIT multiple. Exchanges (regulated derivatives and equities markets and clearing houses) starts the path at the high-single-digit recurring revenue growth guidance (~7.5%) from the 2Q26 release and decelerates smoothly to ~5.5% by year 5, with operating margin improving from 50.2% (TTM) to 52% on scale in data and listings. Fixed Income and Data Services also starts at guidance (7-8% recurring revenue growth) and converges to 6.5% by year 5, with margin moving from 40.2% to 44% due to the subscription-type recurring nature of the data and index business. Mortgage Technology has no explicit guidance: it starts at the recent pace (~5%, FY2025 vs FY2024: +3.9%) and accelerates moderately to 6% assuming a gradual normalization of the mortgage origination cycle, with GAAP margin recovering from 2.9% (TTM, depressed by Black Knight intangible amortization, ~34% of segment revenue) to 16% by year 5 as that amortization dilutes against growing revenue — still well below the current adjusted margin (43%), under a deliberately conservative assumption. The base case multiple is the mix weighted by each segment's share of year-5 EBIT (Exchanges 19x, Fixed Income and Data Services 20x, Mortgage Technology 14x ≈ 18.9x blended), reflecting Exchanges' regulatory and scale moat, the recurring quality of Fixed Income and Data Services, and the discount for Mortgage Technology's cyclicality and lower margin. Net share buybacks (~1.5%/year, the pace revealed over recent quarters after digesting the equity issuance from the Black Knight acquisition) are modeled with the same path across the three scenarios (sharesPath), and the retained cash surplus (after dividend and buybacks, on real TTM flow) accumulates.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (EV falls as cash increases). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $285 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $162, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $285 in 5 years plus $13 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $240. Against the current market price ($162), the margin of safety is 32.5% (trades below the maximum → there is margin) and the total return at that price would be 13.2% annually.

• Exit multiple discipline. The blended multiple (18.9x EV/EBIT in the base case) arises from weighting each segment's own multiple by its share of terminal EBIT, without forcing a single multiple on the consolidated business or taking it from the market.
• Consistency between the 5-year value and the market price. The base case implies a double-digit annual return with a terminal multiple (18.9x) below the entry multiple, without relying on multiple expansion to justify the verdict.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✕ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (127%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Operating leverage. Consolidated operating margin expanded from 40.7% (TTM) toward a target of 44.9% by year 5 on scale in data/listings and dilution of Black Knight amortization.
• Accounting quality and distortions. Goodwill of US$30,600 million and net intangibles of US$15,400 million from serial acquisitions; Black Knight's intangible amortization distorts Mortgage Technology's GAAP margin downward relative to the adjusted margin.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

In Exchanges the driver is traded/cleared volume × fee per contract, with total open interest as a leading indicator of activity. In Fixed Income and Data Services the driver is the Annual Subscription Value (ASV) of data and index contracts, plus the notional amount of CDS cleared. In Mortgage Technology the driver is mortgage closing/origination volume × fee, on a growing base of subscription recurring revenue.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Capital cycle and barriers to entry. Extensive regulatory approval across multiple jurisdictions and the risk management infrastructure of the clearing houses discourage new competitor entry, sustaining the durability of growth.

• Business recurrence and predictability. Subscription-type recurring revenue dominates Fixed Income and Data Services and much of Mortgage Technology; Exchanges combines transactional revenue with recurring data and listings.
• Pricing power. Reference exchanges (NYSE, ICE Futures) and reference data (indices, CDS) with little direct substitution.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• !Leverage (net debt / EBITDA)Net debt / EBITDA 2.7x
• !Interest coverage (EBIT / interest)6.7x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 127% of ROIC
• ✕Value creation (ROIC − 10% bar)-1pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 0.3x — no over-investment
• –Float / working capitalNeutral WC
• ✓Dilution (SBC % of revenue + shares)SBC 2.0% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Leverage and debt structure. Debt of US$19,800 million (mostly long-term senior notes plus a short-term commercial paper tranche) against equity of US$29,600 million; the leverage reduces financial flexibility but is backed by recurring, predictable cash flow.
• Coverage of custodied collateral. The clearing houses hold US$81,200 million in margin and guaranty funds, with US$381 million of ICE's own capital committed as the first line of defense against a clearing member default.

How cash comes in and how it is deployed. In green, the business's own cash (the owner-FCF it generates and reinvests); in gray, the float and credit — customer and funding money, which is not the shareholder's.

On real free cash flow over the trailing twelve months (US$5,078 million), ICE allocated ~39% to buybacks, ~22% to dividends and ~9% to capex and capitalized software development, retaining the rest for debt management and future M&A capacity.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Management's capital allocation. US$1,800 million returned to shareholders in the first half of 2026 (buybacks and dividends), with a new US$4,000 million buyback authorization approved in July 2026.
• Incentive alignment. The institutional ownership identifiable in the proxy (BlackRock 6.9%, Vanguard 10.1%) is typical of an S&P 500 company; the proxy does not break out an aggregate ownership percentage for directors and executives.

• Mortgage Technology's GAAP margin remains depressed by intangible amortization from the Black Knight acquisition, and the market appears to extrapolate that depressed margin rather than anticipate its gradual dilution against growing revenue.
• Ongoing regulatory risk over European clearing houses (EMIR 3.0, Active Account Requirement) weighs on the perception of the Exchanges segment, even though the affected volume is a fraction of the consolidated business.

It trades at a real discount to value, though short of the required margin of safety. Without a clearly identifiable forced-selling catalyst, the most defensible reading is that the market is discounting real business risks (margin recovery in Mortgage Technology, European regulation) more than clear evidence of missing buyers or motivated sellers.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at +1%/year (+7% total): the margin of safety protects the downside. The bull (+20%/year, +153% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Counterparty default risk. A default by a clearing member or a sovereign issuer on custodied collateral (US$81,200 million) could generate material losses despite the committed own capital and the default insurance.
• Concentrated regulatory risk. Regulatory change across multiple jurisdictions (Basel III Endgame, EMIR 3.0, Bank of England CCP reform) could divert clearing volume away from ICE's clearing houses in the United Kingdom and the European Union.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  Fails the quality gate: ROIC 9% does not clear the 10% bar.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 7% at a multiple/growth of 2.9 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 5% (EBIT/EV) + ROIC 9% → falls outside the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts -2% vs our 7%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -0%/yr, bull-scenario ceiling +19%/yr over 5y → capital protected, asymmetry in your favor.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: network effects, cost advantage, intangibles, switching costs, efficient scale → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -2%, within what we project (7%) — the story squares with the numbers.