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Cboe Global Markets CBOE is set to grow, riding on the strength of its expanding product line across asset classes, diversifying business mix ensuring recurring revenues, strong liquidity position and effective capital deployment. The stock carries a 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.
The stock has seen its estimates for 2020 and 2021 move up 0.8% and 0.2%, respectively in the past 30 days, reflecting investor optimism. This Zacks Rank #3 (Hold) leading stock exchange operators by volume in the United States and a leading market globally for ETP trading has a solid history of delivering positive surprise in each of the last 11 quarters.
The company’s return on equity (ROE) has improved over the past three years reflecting effective utilization of shareholder funds. Its trailing 12-month ROE of 17.5% betters the industry average of 11.7%.
Trading volume growth has been driving transaction fees, which in turn has been fueling revenue growth for Cboe Global Markets. Given solid market position and a global reach along with strength in its proprietary products, primarily SPX options, VIX options and VIX futures, the growth momentum should continue.
Cboe Global Markets boasts a compelling inorganic growth story, given its prudent acquisitions. The buyout of MATCHNow, Canada’s largest “dark pool” stock trading platform, diversifies the company’s product capabilities, leverages scale and expands global presence. The pending buyout of BIDS Trading, the largest independent U.S. block trading ATS, will help Cboe Global Markets with a meaningful presence in the substantial off-exchange segment of the U.S. equities market besides being immediately accretive to earnings.
Strategic acquisitions have helped the company achieve expense synergies. Cboe Global estimates to achieve $85 million of run rate synergies in 2020.
Cboe Global Markets enjoys strong liquidity position despite cash outlays to enhance operating leverage. Strong liquidity not only mitigates balance sheet risks but also paves the way for an accelerated capital deployment. It hiked dividend for 10 consecutive years. It had $256 million remaining under its existing share repurchase authorization as on Sep 30, 2020.
The Zacks Consensus Estimate for 2020 earnings of $5.20 per share indicates about 10% increase on 9% higher revenues of $1.2 billion. The expected long-term earnings growth is pegged at 6.4%. The stock carries a favorable Growth Score of B. Growth Score analyzes a company’s growth prospects.
Shares of Cboe Global have lost 23.9% year to date against the industry’s increase of 4.8%. Nevertheless, solid fundamentals like diversified product portfolio and strong liquidity position should continue to drive the stock going forward.
Stocks to Consider
Some better-ranked finance stocks are MarketAxess Holdings MKTX, OTC Markets Group OTCM and Horace Mann Educators Corporation HMN, each carrying Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
MarketAxess delivered earnings surprise of 2.30% in the last reported quarter.
OTC Markets Group delivered earnings surprise of 12.12% in the last reported quarter.
Horace Mann Educators delivered an earnings surprise of 13.89% in the last-reported quarter.
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Cboe Global Markets, Inc. (CBOE) : Free Stock Analysis Report
MarketAxess Holdings Inc. (MKTX) : Free Stock Analysis Report
Horace Mann Educators Corporation (HMN) : Free Stock Analysis Report
OTC Markets Group Inc. (OTCM) : Free Stock Analysis Report
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