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Cboe Global (CBOE) Stock Gains 41% YTD: More Room for Growth?

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·4 min read
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  • CBOE
  • ICE
  • OTCM

Shares of Cboe Global Markets CBOE have gained 40.6% year to date compared with the industry and the Finance sector’s rally of 31.5% and 23.1%, respectively. The Zacks S&P 500 composite has increased 26% in the said time frame. With a market capitalization of about $14 billion, the average volume of shares traded in the last three months was 0.5 million.

Increased medium-term target, strong market position, global reach, strength in its proprietary products, and solid capital position continue to drive Cboe Global. It has a decent track of beating earnings estimates in all the three reported quarters of 2021.

Zacks Investment Research
Zacks Investment Research

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Return on equity in the trailing 12 months was 17.5%, better than the industry average of 13.5%.

The Zacks Consensus Estimate for Cboe Global’s 2021 and 2022 earnings has moved up by 1 cent and 4 cents, respectively, in the past seven days, reflecting analysts’ optimism.

Can it Retain the Momentum?

The Zacks Consensus Estimate for 2021 indicates a year-over-year improvement of 9.5% on 15.6% higher revenues. The consensus estimate for 2022 indicates a year-over-year improvement of 2.9% on 3.9% higher revenues. It has an impressive Growth Score of B.

CBOE Global expects to deliver total net revenue growth of 5-7% annually, an increase from 4-6% growth expected earlier. While Cboe Global expects Data and Access Solutions to contribute organic net revenue growth of 7-10% annually over the medium term, derivatives initiatives will likely contribute 2-4% of total organic net revenue growth over the medium term. CBOE targets a medium-term return on invested capital of at least 10%.

CBOE Global’s growth strategy revolves around expanding its product, broadening geographic reach to highest value markets, diversifying business mix with recurring revenues, ramping up growth with recurring non-transaction revenues and leveraging technology. Cboe Global expects medium- to long-term organic total net revenue growth of 4-6%.

Cboe Global Markets boasts a compelling inorganic growth story. Recently, CBOE agreed to buy Aequitas Innovations in a bid to strengthen its North American presence. Acquisitions have expanded and diversified CBOE Global Markets’ product portfolio with U.S. and European cash equities, Global ETPs and Global FX, solid pan-European equities and global FX positions apart from strengthening its service portfolio and expanding geographically. Cboe Global estimates net revenue contribution from recent acquisitions in the range of 4% to 6%.

Being the largest stock exchange operator by volume in the United States and a leading market globally for ETP trading, this Zacks Rank #2 (Buy) company is accelerating non-transaction revenue growth. Cboe Global estimates recurring non-transactional organic revenue growth of 14% in 2021, up from 12-13% guided earlier.

Riding on a solid capital position, CBOE has hiked dividends each year since its IPO and increased the same by 14% in October 2021, marking the 11th consecutive year of dividend hike. It also has $318.9 million remaining under its existing share repurchase authorization.

Cboe Global is well poised for progress, evident from its favorable VGM Score of B. Here V stands for Value, G for Growth, and M for Momentum, with the score being a weighted combination of all three factors.

Other Stocks to Consider

Some other top-ranked stocks include OTC Markets Group OTCM, Intercontinental Exchange ICE and Athene Holding ATH.

OTC Markets Group sports a Zack Rank #1 (Strong Buy). The Zacks Consensus Estimate for OTC Markets Group’s 2021 and 2022 has moved up 4.6% and 7.4% in the past seven days. The expected long-term earnings growth rate is pegged at 9%, in line with the industry average.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Intercontinental Exchange carries a Zacks Rank #2. The Zacks Consensus Estimate for 2021 and 2022 earnings of Intercontinental Exchange implies 12.9% and 8.9% year-over-year growth, respectively.

Athene carries a Zacks Rank #2. The Zacks Consensus Estimate for 2021 earnings has moved up 9.9% in the past 30 days and implies 123.7% year-over-year growth. Athene delivered a four-quarter average earnings surprise of 46.12%.

OTCM, ICE and ATH have gained 72.1%, 14.7% and 96.5%, respectively, year to date.

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Intercontinental Exchange Inc. (ICE) : Free Stock Analysis Report

Cboe Global Markets, Inc. (CBOE) : Free Stock Analysis Report

Athene Holding Ltd. (ATH) : Free Stock Analysis Report

OTC Markets Group Inc. (OTCM) : Free Stock Analysis Report

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