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If you are wondering whether Cboe Global Markets is priced attractively right now, this article will walk through what the current share price might be implying about its value.
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The stock last closed at US$301.27, with returns of 0.5% over 7 days, 11.1% over 30 days, 21.4% year to date, 43.0% over 1 year, 163.4% over 3 years and 209.2% over 5 years. This helps put recent moves into a longer term context for anyone watching the price closely.
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Recent headlines around Cboe Global Markets have focused on its role as a major exchange operator and how trading volumes and product demand can affect investor sentiment toward the stock. These developments help frame why the share price has been active and set up the question of whether the current valuation matches the underlying business.
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On our checks, Cboe Global Markets scores 1 out of 6 for undervaluation. You can see the full breakdown of that score at 1 / 6 valuation checks passed. We will unpack that by looking at several common valuation methods before finishing with a way of thinking about value that can tie all of these approaches together.
Cboe Global Markets scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
The Excess Returns model looks at how much profit Cboe Global Markets generates over and above the return that equity investors are assumed to require, then capitalizes that surplus to estimate what the shares might be worth.
Here, the starting point is an estimated Book Value of $49.10 per share and a Stable EPS of $14.02 per share, based on weighted future Return on Equity estimates from 5 analysts. That implies an Average Return on Equity of 21.77%, which is compared with a Cost of Equity of $5.10 per share. The difference between the earnings generated and the required return is the Excess Return, estimated at $8.93 per share.
Using these inputs along with a Stable Book Value of $64.43 per share, based on future book value estimates from 2 analysts, the model arrives at an intrinsic value of about $262.59 per share. Compared with the recent share price of $301.27, this framework suggests that the stock is about 14.7% overvalued.
Result: OVERVALUED
Our Excess Returns analysis suggests Cboe Global Markets may be overvalued by 14.7%. Discover 50 high quality undervalued stocks or create your own screener to find better value opportunities.
For a profitable company like Cboe Global Markets, the P/E ratio is a useful way to relate what you pay for the stock to the earnings it generates. It gives you a quick sense of how much the market is willing to pay for each dollar of current earnings.
What counts as a “normal” or “fair” P/E depends on how the market views a company’s growth prospects and risk profile. Higher expected growth or lower perceived risk can support a higher P/E, while lower growth or higher risk typically point to a lower P/E.
Cboe Global Markets currently trades on a P/E of 28.80x. That is above the Capital Markets industry average P/E of 21.79x, but below the peer group average of 32.42x. Simply Wall St’s “Fair Ratio” for Cboe Global Markets is 14.52x, which is a proprietary estimate of what the P/E might be given factors such as earnings growth, profit margins, industry, market cap and company specific risks.
This Fair Ratio goes a step further than simple peer or industry comparisons because it adjusts for those fundamental drivers, rather than assuming similar companies all deserve similar multiples. With the current P/E of 28.80x well above the Fair Ratio of 14.52x, this framework points to the shares looking expensive on an earnings multiple basis.
Result: OVERVALUED
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Earlier we mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St let you tell your own story for Cboe Global Markets by tying your assumptions for fair value, future revenue, earnings and margins into a clear forecast, then comparing that Fair Value to today’s price. On the Community page you can see how one investor, using detailed cash flow and dividend models, arrives at a Fair Value around US$662 per share, while another, using a different set of assumptions and an analyst style framework, comes in closer to US$282. Both of those views update automatically as new earnings or news arrive, giving you an easy tool to decide whether the current price or your Fair Value is closer to the story you believe.
Do you think there’s more to the story for Cboe Global Markets? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include CBOE.
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