Cboe Global Stock Lags Industry in 3 Months: Should You Buy?

Cboe Global Markets, Inc. CBOE shares have gained 2.2% in the past three months, underperforming its industry and the Zacks S&P 500 composite’s return in the same time frame. However, the stock outperformed the sector in the same time frame. Its strong market position, global reach, proprietary products’ strength and solid capital position it for growth.This company has a market capitalization of $22.2 billion. The average volume of shares traded in the last three months was 0.9 million.CBOE Vs. Industry, Sector and S&P 500 in 3 MonthsImage Source: Zacks Investment ResearchCBOE shares are trading well above the 50-day moving average, indicating a bullish trend. Muted Analyst Sentiment for CBOE a ConcernFour of the 10 analysts covering the stock lowered their estimates for 2024, while three lowered the same for 2025. The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 0.3% and 0.5%,  respectively, in the past 30 days.Optimistic Growth ProjectionThe Zacks Consensus Estimate for 2024 and 2025 earnings indicates a year-over-year improvement of 11% and 5.6%, respectively. The expected long-term earnings growth rate is pegged at 13.7%, better than the industry average of 8.4%. The company has a Growth Score of A.Factors Impacting CBOECBOE is the largest stock exchange operator by volume in the United States and a leading market globally for ETP trading. A diversified business mix ensuring uninterrupted revenue generation and recurring non-transaction revenues reflect its organic strength. We estimate the 2026 top line to witness a three-year CAGR of 6.2%.  CBOE estimates organic total net revenue growth between 6% and 8% in 2024.CBOE estimates Data and Access Solutions organic net revenue growth in the range of 7%-10% in the medium term. We estimate access and capacity fees in 2026 to witness a three-year CAGR of 5.5% and 2026 market data revenues to register a three-year CAGR of 3.7%.CBOE’s inorganic growth story is impressive. The company achieved a greater global breadth of services and products, as well as new distribution channels apart from generating revenues and cost synergies through strategic buyouts.Banking on operational expertise, the company has been strengthening its balance sheet by improving its cash position and lowering its debt balance.  The leverage ratio, as well as the times interest earned, compares favorably with the industry average.CBOE’s strategic investments is well supported by solid capital management. Also, its wealth distribution remains impressive. CBOE increased dividends for 13 straight years and has $679.8 million left under its current share repurchase authorization. Cboe Global's elevated expenses remain a major concern. For 2024, CBOE estimates adjusted operating expenses in the range of $798-$808 million.Cboe Global has been facing intense competition due to increased market consolidation that tends to reduce market share, and this includes both product and price competition.The company’s investment in European, Canadian and Asia Pacific operations remains exposed to volatility in currency exchange rates through translation of net assets or equity to U.S. dollars.  The company is also exposed to credit risk from third parties, including customers, counterparties and clearing agents.CBOE’s Favorable Return on CapitalReturn on invested capital hovered around 10% over the last few years. The company has raised its capital investment significantly, reflecting CBOE’s efficiency in utilizing funds to generate income. The return on invested capital in the trailing 12 months was 11.7%, higher than the industry’s average of 5%.  Image Source: Zacks Investment ResearchCBOE’s return on equity has been improving since 2019, reflecting its efficiency in utilizing shareholders’ funds. ROE over the trailing 12 months was 22.3%, outperforming the industry average of 13.3%.Image Source: Zacks Investment ResearchAverage Target Price for CBOE Suggests a Slight UpsideBased on short-term price targets offered by 16 analysts, the Zacks average price target is $213.81 per share. The average suggests a potential 0.1% upside from Monday’s closing price of $211.91.Attractive ValuationCboe Global shares are trading at a discount to the Zacks Securities and Exchange industry. Its forward price-to-earnings of 23.72X is lower than the industry average of 24.43X. Image Source: Zacks Investment ResearchThe stock remains attractively valued compared with other players like ICE Intercontinental Exchange Inc ICE and Nasdaq Inc NDAQ.Parting ThoughtsCboe Global’s growth strategy of expanding its product line across asset classes, broadening geographic reach, diversifying the business mix with recurring revenues and leveraging technology reflects its operational expertise. A discounted valuation and a VGM Score of B raise hope.Yet, higher expenses and exposure to credit risk from third parties, including customers, counterparties and clearing agents, pose a risk. Muted analyst sentiments and share price underperformance also keep us on guard.  Thus, it is better to adopt a wait-and-see approach for this Zacks Rank #3 (Hold) stock in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 228 positions with double- and triple-digit gains in 2023 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Intercontinental Exchange Inc. (ICE): Free Stock Analysis Report Nasdaq, Inc. (NDAQ): Free Stock Analysis Report Cboe Global Markets, Inc. (CBOE): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks