CME Group Inc (CME, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $209.13, CME Group Inc has witnessed a daily gain of 0.83%, marked against a three-month change of 14.75%. A thorough analysis, underlined by the GF Score, suggests that CME Group Inc is well-positioned for substantial growth in the near future.
Decoding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
Here is a breakdown of CME Group Inc's GF Score:
- Financial strength rank: 6/10
- Profitability rank: 9/10
- Growth rank: 9/10
- GF Value rank: 5/10
- Momentum rank: 10/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With high ranks in profitability, growth, and momentum, and decent ranks in financial strength and GF value, GuruFocus assigned CME Group Inc the GF Score of 92 out of 100, which signals the highest outperformance potential.
Understanding CME Group Inc's Business
Based in Chicago, CME Group Inc operates exchanges that provide investors, suppliers, and businesses the ability to trade futures and derivatives based on interest rates, equity indexes, foreign currencies, energy, metals, and commodities. The company was founded in 1898 and completed its initial public offering in 2002. Since then, CME Group Inc has consolidated parts of the industry by merging with crosstown rival, CBOT Holdings in 2007 before acquiring Nymex Holdings in 2008 and NEX in 2018. In addition, the company has a 27% stake in S&P Dow Jones Indices, making the Chicago Mercantile Exchange the exclusive venue to trade and clear S&P futures contracts. Through CME's acquisition of NEX in 2018 it has also expanded into cash foreign exchange, fixed income trading, and collateral optimization.
Here is the income breakdown of CME Group Inc:
Financial Strength Breakdown
According to the Financial Strength rating, CME Group Inc's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure. The Interest Coverage ratio for CME Group Inc stands impressively at 19.7, underscoring its strong capability to cover its interest obligations. This robust financial position resonates with the wisdom of legendary investor Benjamin Graham, who favored companies with an interest coverage ratio of at least 5. With a favorable Debt-to-Revenue ratio of 0.65, CME Group Inc's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows CME Group Inc's impressive standing among its peers in generating profit. The Piotroski F-Score confirms CME Group Inc's solid financial situation based on Joseph Piotroski's nine-point scale, which measures a company's profitability, funding and operating efficiency. CME Group Inc's strong Predictability Rank of 5.0 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, CME Group Inc demonstrates a strong commitment to expanding its business. The company's 3-Year Revenue Growth Rate is 0.9%, which outperforms worse than 64.3% of 675 companies in the Capital Markets industry. Moreover, CME Group Inc has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate stands at 6.2, and the rate over the past five years is 5.7. This trend accentuates the company's continued capability to drive growth.
Conclusion
With its strong financial strength, profitability, and growth metrics, the GF Score highlights CME Group Inc's unparalleled position for potential outperformance. This comprehensive analysis provides a solid foundation for investors seeking to make informed decisions about their portfolio. GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
