Cboe Global Markets Inc (CBOE, Financial) recently gained 1.93% in a single trading day, and it has witnessed a 14.84% increase over the past three months. Additionally, it has an Earnings Per Share (EPS) (EPS) of 6.1. But the question that arises is - is the stock significantly overvalued? This article aims to answer that question by providing an in-depth analysis of the company's valuation.
Company Overview
Cboe Global Markets Inc (CBOE, Financial) is a leading provider of market infrastructure and tradable products, delivering innovative trading, clearing, and investment solutions to market participants worldwide. The company is committed to operating a trusted, inclusive global marketplace and providing top-tier products, technology, and data solutions that enable participants to shape a sustainable financial future. Cboe offers trading solutions and products in multiple asset classes, including equities, derivatives, FX, and digital assets, across North America, Europe, and Asia Pacific.
Understanding the GF Value
The GF Value is a unique measure that calculates the intrinsic value of a stock based on historical trading multiples, GuruFocus adjustment factors, and future business performance estimates. It provides a fair value for the stock, around which the price is expected to fluctuate. If the stock price is significantly above the GF Value Line, it indicates overvaluation, and the future returns may be poor. However, if the price is significantly below the GF Value Line, the stock may be undervalued, and the future returns could be higher.
According to GuruFocus' valuation method, Cboe Global Markets (CBOE, Financial) appears to be significantly overvalued. The stock's current price of $152.88 per share gives Cboe Global Markets a market cap of $16.10 billion, which is significantly higher than our estimated fair value. Consequently, the long-term return of its stock is likely to be much lower than its future business growth.
Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before investing. Cboe Global Markets has a cash-to-debt ratio of 0.3, ranking worse than 81.22% of companies in the Capital Markets industry. Based on this, GuruFocus ranks Cboe Global Markets' financial strength as 7 out of 10, indicating a fair balance sheet.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. Cboe Global Markets has been profitable for 10 out of the past 10 years. Over the past twelve months, the company had a revenue of $3.90 billion and Earnings Per Share (EPS) of $6.1. Its operating margin is 25.46%, ranking better than 66.82% of companies in the Capital Markets industry. Overall, the profitability of Cboe Global Markets is ranked 10 out of 10, indicating strong profitability.
Growth is a crucial factor in a company's valuation. The 3-year average annual revenue growth rate of Cboe Global Markets is 18.4%, ranking better than 70.63% of companies in the Capital Markets industry. However, the 3-year average EBITDA growth rate is -1.2%, which ranks worse than 70.51% of companies in the Capital Markets industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) is another way to evaluate its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Cboe Global Markets' ROIC was 9.98, while its WACC came in at 7.16.
Conclusion
In conclusion, the stock of Cboe Global Markets (CBOE, Financial) is estimated to be significantly overvalued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks worse than 70.51% of companies in the Capital Markets industry. To learn more about Cboe Global Markets stock, you can check out its 30-Year Financials here.
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