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Reasons Why Cboe Global (CBOE) Stock is a Solid Pick Now
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Cboe Global Markets (CBOE - Free Report) is poised for growth on the back of higher transaction fees, access and capacity fees, strategic acquisitions as well as a solid cash position.
Growth Projections
The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $5.55 and $5.69, indicating year-over-year increase of 5.3% and 2.4%, respectively.
Estimate Revision
The Zacks Consensus Estimate for 2021 and 2022 has moved 0.2% and 0.3% north, respectively, in the past 30 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 3.80%, on average.
Zacks Rank & Price Performance
Cboe Global currently carries a Zacks Rank #2 (Buy). The stock has rallied 46.4% compared with the industry’s increase of 30.4% on a year-to-date basis.
Image Source: Zacks Investment Research
Return on Equity (ROE)
The company’s ROE for the trailing 12 months is 16.6%, better than the industry average of 12.8%. This reflects on the company’s efficiency in utilizing shareholders’ funds.
Business Tailwinds
Cboe Global, being the largest stock exchange operator by volume in the United States and a leading market for ETP trading, continues to benefit from higher revenues driven by increased transaction fees, access and capacity fees, market data fees, regulatory fees, as well as other revenues across the company’s segments.
Access and capacity fees along with proprietary market data are expected to increase 7% to 8% in 2021.
Given the solid first-half performance, the company raised its 2021 organic growth target for recurring non-transaction revenues to the range of 12-13% from the earlier guidance of 10-11%. New subscribers to Cboe's front-end platforms, such as Silexx, LiveVol Pro and TradeAlert, as well as demand for logical ports and market data, should drive the non-transaction revenue.
The company pursues acquisitions to strengthen its business. In July 2021, it closed the acquisition of Chi-X that enabled it to establish a strong presence in the Asia-Pacific region. Its other notable buyouts include the acquisition of leading pan-European equities clearing house, EuroCCP as well as the Canadian alternative trading system (ATS) MATCHNow in 2020. 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 to build on a comprehensive equities platform.
Cboe Global plans to launch Cboe LIS powered by BIDS in Canada in February 2022, where it expects to combine the industry-leading block trading capabilities from MATCHNow and BIDS to create an enhanced market center for block-sized liquidity. The launch of BIDS in Canada along with the planned migration of MATCHNow to Cboe technology, is expected to further extend its world-class trading platform.
Cboe Global enjoys strong liquidity position, despite cash outlays, to enhance operating leverage. Strong liquidity mitigates balance-sheet risks and accelerates capital deployment.
In August 2021, Cboe Global approved a 14% dividend hike that marked its 11th consecutive increase. Its current dividend yield of 1.5% is higher than the industry average of 1%. At present, it has $ $318.9 million remaining under its existing share repurchase program.
Image: Bigstock
Reasons Why Cboe Global (CBOE) Stock is a Solid Pick Now
Cboe Global Markets (CBOE - Free Report) is poised for growth on the back of higher transaction fees, access and capacity fees, strategic acquisitions as well as a solid cash position.
Growth Projections
The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $5.55 and $5.69, indicating year-over-year increase of 5.3% and 2.4%, respectively.
Estimate Revision
The Zacks Consensus Estimate for 2021 and 2022 has moved 0.2% and 0.3% north, respectively, in the past 30 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 3.80%, on average.
Zacks Rank & Price Performance
Cboe Global currently carries a Zacks Rank #2 (Buy). The stock has rallied 46.4% compared with the industry’s increase of 30.4% on a year-to-date basis.
Return on Equity (ROE)
The company’s ROE for the trailing 12 months is 16.6%, better than the industry average of 12.8%. This reflects on the company’s efficiency in utilizing shareholders’ funds.
Business Tailwinds
Cboe Global, being the largest stock exchange operator by volume in the United States and a leading market for ETP trading, continues to benefit from higher revenues driven by increased transaction fees, access and capacity fees, market data fees, regulatory fees, as well as other revenues across the company’s segments.
Access and capacity fees along with proprietary market data are expected to increase 7% to 8% in 2021.
Given the solid first-half performance, the company raised its 2021 organic growth target for recurring non-transaction revenues to the range of 12-13% from the earlier guidance of 10-11%. New subscribers to Cboe's front-end platforms, such as Silexx, LiveVol Pro and TradeAlert, as well as demand for logical ports and market data, should drive the non-transaction revenue.
The company pursues acquisitions to strengthen its business. In July 2021, it closed the acquisition of Chi-X that enabled it to establish a strong presence in the Asia-Pacific region. Its other notable buyouts include the acquisition of leading pan-European equities clearing house, EuroCCP as well as the Canadian alternative trading system (ATS) MATCHNow in 2020. 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 to build on a comprehensive equities platform.
Cboe Global plans to launch Cboe LIS powered by BIDS in Canada in February 2022, where it expects to combine the industry-leading block trading capabilities from MATCHNow and BIDS to create an enhanced market center for block-sized liquidity. The launch of BIDS in Canada along with the planned migration of MATCHNow to Cboe technology, is expected to further extend its world-class trading platform.
Cboe Global enjoys strong liquidity position, despite cash outlays, to enhance operating leverage. Strong liquidity mitigates balance-sheet risks and accelerates capital deployment.
In August 2021, Cboe Global approved a 14% dividend hike that marked its 11th consecutive increase. Its current dividend yield of 1.5% is higher than the industry average of 1%. At present, it has $ $318.9 million remaining under its existing share repurchase program.
Other Stocks to Consider
Some other top ranked stocks from the finance sector include OTC Markets Group Inc. (OTCM - Free Report) , Nasdaq, Inc. (NDAQ - Free Report) and Equifax, Inc. (EFX - Free Report) . While OTC Markets sports a Zacks Rank #1 (Strong Buy), Nasdaq and Equifax carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings of OTC Markets surpassed estimates in each of the last four quarters. It has a trailing four-quarter earnings surprise of 35.73%, on average.
Nasdaq surpassed estimates in each of the last four quarters. It has a trailing four-quarter earnings surprise of 9.21%, on average.
Earnings of Equifax surpassed estimates in each of the last four quarters. It has a trailing four-quarter earnings surprise of 17.71%, on average.