Why CME Group Inc (NASDAQ:CME) Could Be A Buy
Let’s talk about the popular CME Group Inc (NASDAQ:CME). The company’s shares saw significant share price volatility over the past couple of months on the NasdaqGS, rising to the highs of $171.42 and falling to the lows of $151.45. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether CME Group’s current trading price of $164.21 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at CME Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View our latest analysis for CME Group
What is CME Group worth?
According to my valuation model, the stock is currently overvalued by about 86%, trading at US$164.21 compared to my intrinsic value of $88.15. This means that the opportunity to buy CME Group at a good price has disappeared! In addition to this, it seems like CME Group’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will CME Group generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for CME Group, at least in the near future.
What this means for you:
Are you a shareholder? If you believe CME should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to reduce your total portfolio risk. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on CME for some time, now may not be the best time to enter into the stock. Price climbed passed its true value, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on CME Group. You can find everything you need to know about CME Group in the latest infographic research report. If you are no longer interested in CME Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
