Should You Hold Cboe Global (CBOE) Stock in Your Portfolio?
Cboe Global (CBOE) is set to grow on higher trading volumes, strategic acquisitions and solid capital position.
Cboe Global Markets CBOE is poised for growth on the back of higher transaction and recurring non-transaction revenues, strategic acquisitions as well as effective capital deployment.
The Zacks Consensus Estimate for Cboe Global’s 2022 earnings per share is pegged at $5.99, indicating a year-over-year increase of 2.3%. The figure has moved 1% north in the past seven days, reflecting analysts’ optimism.
Earnings Surprise History
Cboe Global has a decent earnings surprise history. The company’s earnings beat estimates in three of the last four quarters and missed in one. It has a trailing four-quarter earnings surprise of 3.22%, on average.
Zacks Rank & Price Performance
Cboe Global currently carries a Zacks Rank #3 (Hold). The stock has rallied 29.4%, outperforming the industry’s increase of 16.7% in the past year.
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Cboe Global has a favorable VGM Score of A. VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum.
Return on Equity (ROE)
The company’s ROE for the trailing 12 months is 17.5%, better than the industry average of 13.4%. This reflects the company’s efficiency in utilizing shareholders’ funds.
Cboe Global continued to witness solid top-line growth across each of the business segments, riding on higher transaction and recurring non-transaction revenues.
Higher volumes in index options and volatility products, increased demand for its suite of data and access solutions and growth in trading volumes across all the segments are likely to drive the performance of the security exchange.
Given the solid performance in the first nine months, Cboe Global raised its 2021 organic growth target for recurring non-transaction revenues to approximately 14% from the earlier guidance of 12-13%. Additional units or subscribers, continued demand for access to exchanges, proprietary market data and new subscribers to Cboe’s front-end platforms, including Silexx and Trade Alert, are expected to drive organic recurring non-transaction revenues.
Cboe Global, being the largest stock exchange operator by volume in the United States and a leading market for ETP trading, expects to deliver total net revenue growth of 5-7% annually, an increase from 4-6% growth expected earlier for the medium term. For the first time, CBOE guided medium-term return on invested capital target of at least 10%. 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 Global expects medium- to long-term organic total net revenue growth of 4-6%.
Cboe Global Markets boasts a compelling inorganic growth story. In November 2021, CBOE agreed to buy Aequitas Innovations in an effort to strengthen its North American presence. The security exchange pursues acquisitions to strengthen its business. These acquisitions enable Cboe Global to pursue the development of derivatives trading, clearing capabilities in the European equities business region, gain a foothold in the key capital market and build a comprehensive equities platform.
Cboe Global boasts a robust liquidity position, which mitigates balance-sheet risks and accelerates capital deployment.
Riding on strong cash flow generation, CBOE has hiked dividends each year since its IPO and increased the same by 14% in October 2021. This marked the 11th consecutive year of dividend hikes. It currently yields 1.5%, which is better than the industry average of 0.9%. At present, it has $318.9 million remaining under its existing share repurchase authorization.
Stocks to Consider
Some better-ranked stocks from the finance sector include OTC Markets Group OTCM, Usio USIO and Intercontinental Exchange ICE. While OTC Markets and Usio sport a Zacks Rank #1 (Strong Buy), Intercontinental Exchange carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for OTC Markets Group’s 2022 earnings has moved up 14.8% in the past 60 days. The expected long-term earnings growth rate is pegged at 9%.
OTC Markets Group’s earnings surpassed estimates in each of the last four quarters, the average beat being 41.39%. In the past year, OTCM has gained 71.4%.
The Zacks Consensus Estimate for Usio’s 2022 earnings per share indicates a year-over-year increase of 66.6%.
Usio’s earnings surpassed estimates in each of the last four quarters, the average beat being 81.25%. In the past year, USIO has gained 27%.
The Zacks Consensus Estimate for Intercontinental Exchange’s 2022 earnings has moved up 0.9% in the past 30 days. The expected long-term earnings growth rate is pegged at 10.3%, higher than the industry average of 9.5%.
ICE’s earnings surpassed estimates in each of the last four quarters, the average beat being 3.11%. In the past year, ICE has gained 12%. The Zacks Consensus Estimate for Intercontinental Exchange’s 2022 earnings implies 9.7% year-over-year growth.
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