On August 04, 2026, we delve into the DCF analysis for CME Group Inc CME, which has shown mixed price performance recently. The stock has increased by 4.2% over the past week and 12.5% over the past month, but it has only gained 0.3% year-to-date and is down 1.5% over the past year.
- DCF Earnings-based intrinsic value of $194.04 vs current price of $266.17 (margin of safety: -37.2%)
- DCF FCF-based intrinsic value of $184.22 (second opinion)
- GF Scoreâ„¢ of 78/100 indicates a moderate level of reliability for the DCF inputs
What Is CME Worth? DCF Earnings-Based Model
The DCF earnings-based model employs a two-stage approach to estimate the intrinsic value of CME Group Inc. The first stage reflects a growth phase lasting 10 years, during which we expect the company's EPS to grow at an annual rate of 10.4%. The second stage represents a terminal phase with a more modest growth rate of 4% over the subsequent 10 years. The discount rate applied is 11%, derived from the risk-free rate and equity risk premium.
| Parameter | Value |
|---|---|
| Current EPS (TTM, excl. non-recurring) | $11.80 |
| 10-Year Growth Rate | 10.4% |
| 10-Year Treasury Rate | 4.70% |
| Discount Rate (ceil(Treasury) + 6%) | 11% |
| Terminal Growth Rate | 4% |
The calculation summary for the two-stage model is as follows:
| Stage | Description | Value |
|---|---|---|
| Growth Stage (Years 1-10) | EPS growing at 10.4%, discounted at 11% | $114.55 |
| Terminal Stage (Years 11-20) | 4% terminal growth, discounted at 11% | $79.49 |
| Intrinsic Value | Growth + Terminal | $194.04 |
Comparing the current price of $266.17 with the intrinsic value of $194.04 reveals that CME is significantly overvalued, with a margin of safety of -37.2%. It is important to note that GuruFocus uses EPS excluding non-recurring items, as research indicates that stock prices tend to correlate more closely with earnings than with free cash flow. For further details, visit the CME DCF Calculator.
What Does the Free Cash Flow DCF Say?
The free cash flow (FCF) based intrinsic value for CME is calculated at $184.22. When compared to the earnings-based intrinsic value of $194.04, the two models present a disagreement regarding the valuation of the stock. Both models indicate that CME is significantly overvalued, with the FCF model reflecting a margin of safety of -44.5%.
How Does GF Valueâ„¢ Compare to the DCF Models?
The GF Valueâ„¢ for CME stands at $271.35, providing a third perspective on the stock's valuation. GF Valueâ„¢ is a proprietary measure from GuruFocus that takes into account historical trading multiples, past business growth, and future performance estimates. In this case, the GF Valueâ„¢ suggests a slight undervaluation compared to the DCF models, which indicate significant overvaluation. For more insights, check the GF Valueâ„¢ page.
What Does CME's GF Scoreâ„¢ Tell Us?
The GF Scoreâ„¢ measures a company's financial strength, profitability, growth potential, valuation, and momentum, providing a comprehensive view of its overall quality. CME's score of 78/100 suggests a relatively strong position, although the predictability rank of 2 out of 5 stars indicates that the DCF model may be less reliable for this stock. The following table summarizes CME's GF Scoreâ„¢ metrics:
| Metric | Rating |
|---|---|
| GF Scoreâ„¢ | 78/100 |
| Financial Strength | 5/10 |
| Profitability | 8/10 |
| Growth | 9/10 |
| Valuation | 9/10 |
| Momentum | 1/10 |
For more detailed information, visit the CME stock page.
Key Assumptions and Limitations
The DCF models are highly sensitive to the assumptions made regarding growth rates and discount rates. Stocks that receive low predictability ratings tend to produce less reliable DCF estimates. Additionally, the terminal growth rate of 4% is a simplifying assumption that may not fully capture the company's long-term potential.
What This Means for Investors
In synthesizing the insights from the DCF earnings model, the FCF model, and the GF Valueâ„¢, it is evident that there is a notable disagreement among the valuation perspectives. While the DCF models suggest that CME is significantly overvalued, the GF Valueâ„¢ indicates a slight undervaluation. This tension is further complicated by the guru ownership signal, with 18 gurus currently holding the stock, 4 adding to their positions, and 11 trimming their holdings in recent quarters. Additionally, insider activity shows net selling over the past three months, which may raise concerns about the stock's future performance. Given the mixed signals, investors should proceed with caution. For further exploration of CME's valuation, check out the CME DCF Calculator.
Frequently Asked Questions
What is CME's intrinsic value based on DCF?
Answer: earnings-based $194.04, FCF-based $184.22
Is CME overvalued or undervalued?
Answer: CME is significantly overvalued based on DCF models, while GF Valueâ„¢ suggests slight undervaluation.
How reliable is the DCF model for CME?
Answer: The DCF model's reliability is limited, as indicated by a predictability rank of 2 out of 5 stars.
This stock alert was generated using automated technology and GuruFocus financial data to provide readers with timely and accurate market reporting. This content was reviewed by GuruFocus editorial team prior to publication. Please send any questions or comments about this story to [email protected].
