With a daily gain of 3.94% and an Earnings Per Share (EPS) (EPS) of $7.87, CME Group Inc (CME, Financial) has caught the attention of many investors. But is the stock fairly valued? This article aims to answer this question and provide an in-depth analysis of the company's valuation. Continue reading to understand more about CME Group's intrinsic value and its financial performance.
Introduction to CME Group Inc (CME, Financial)
Based in Chicago, CME Group operates exchanges that allow investors, suppliers, and businesses to trade futures and derivatives based on various financial and commodity markets. Since its IPO in 2002, CME Group has consolidated parts of the industry through strategic mergers and acquisitions. The company also holds a 27% stake in S&P Dow Jones Indices, making it the exclusive venue to trade and clear S&P futures contracts.
As of July 26, 2023, CME Group's stock price is $198.75, with a market cap of $71.5 billion. When compared with its GF Value of $212.91, the stock appears to be fairly valued.
Understanding GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, computed considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line denotes the stock's ideal fair trading value.
According to GuruFocus Value calculation, CME Group (CME, Financial) is estimated to be fairly valued. The long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength of CME Group
Before investing in a company, it's crucial to assess its financial strength. CME Group has a cash-to-debt ratio of 0.49, which is lower than 75.96% of companies in the Capital Markets industry. This indicates that the financial strength of CME Group is fair.
Profitability and Growth of CME Group
CME Group has been profitable for 10 years over the past 10 years, with revenues of $5.1 billion and EPS of $7.87 in the past 12 months. Its operating margin of 60.04% is better than 88.47% of companies in the Capital Markets industry. However, the 3-year average annual revenue growth of CME Group is 0.9%, which ranks worse than 63.62% of companies in the industry.
ROIC vs WACC
A comparison of a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also evaluate its profitability. During the past 12 months, CME Group's ROIC is 1.32 while its WACC came in at 7.25.
Conclusion
In conclusion, the stock of CME Group (CME, Financial) is estimated to be fairly valued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks worse than 60.74% of companies in the Capital Markets industry. To learn more about CME Group stock, you can check out its 30-Year Financials here.
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