Cboe Global's 41% Year-to-Date Rally: A Look at Its Future Prospects

Cboe Global Markets (CBOE) has seen a significant rise in its stock price, with a 41.1% rally year to date, surpassing the industry's growth of 19%, and even outperforming the broader Finance sector's 7.4% and the Zacks S&P 500 composite's 19.4% increases within the same timeframe. At current, the company's market capitalization stands at a robust $18.7 billion, with an average of 0.7 million shares trading hands over the past three months.

The company's solid performance can be attributed to its strong market position, extensive global presence, powerful proprietary products, and a sound capital structure. Adding to the positive outlook, analysts have revised their earnings estimates upwards for CBOE for the years 2023 and 2024 by 2.2% and 3.4% respectively in the last 30 days, highlighting a consensus of confidence in its continued growth potential.

In a testament to its reliability, CBOE has consistently surpassed earnings expectations over the last four quarters. Moreover, the company has witnessed a 13.7% growth in earnings over the past five years, outpacing the industry's 10.5% average. Its return on equity stands at an impressive 22.2% over the past twelve months, indicating efficient capital usage and a performance that is superior to the industry average of 12.4%.

Can Cboe Global Keep Up the Pace?

Looking ahead, the Zacks Consensus Estimate is set at $7.53 for CBOE's 2023 earnings, projecting an 8.7% increase year over year alongside a revenue bump of 9.8% to $1.9 billion. For 2024, the earnings estimate lies at $7.97 per share, anticipating a 5.9% rise year over year with revenues climbing 4.6% to $2 billion. Furthermore, the long-term earnings growth is anticipated to be 10.2%, which is encouraging when compared to the industry's 7.4% average.

CBOE isn't just the largest stock exchange operator in the United States by volume; it also holds a significant position in the global market for ETP trading. Its varied business mix, technology, and strategic acquisitions contribute to its positive growth trajectory.

The company's organic growth has been a key driver, especially evident in its revenue trends. Forecasting for 2025, we expect to see a three-year compound annual growth rate (CAGR) of 1.1% for its top line, propelled by transaction fees. A volatile market often leads to increased trading volumes, which in turn boost transaction fees and, consequently, revenue. CBOE itself projects an organic net revenue growth between 7% and 9% for 2023.

Not to be overshadowed, CBOE has also seen significant inorganic growth through acquisitions, expanding its global reach, introducing new product and service lines, and realizing revenue and cost synergies. The company further benefits from its recurring non-transaction revenues, with projections of organic net revenue growth in the Data and Access Solutions sector estimated to be in the 7%-10% range for 2023. By 2025, access fees and market data revenue are expected to see a three-year CAGR of 6.3% and 4.5%, respectively.

To keep margins healthy, CBOE is actively managing costs, indicating expense guidance for 2023 in the range of $754 million to $762 million, reduced from the $766 million to $774 million range previously guided. The company prioritizes returning value to shareholders through strategic investments for growth and has also shown commitment to shareholder return by increasing dividends for 13 consecutive years. Currently, CBOE has $390 million remaining under its share repurchase authorization.

Alongside CBOE, other notable finance sector stocks performing well include CME Group (CME), Coinbase Global (COIN), and Berkshire Hathaway Inc. (BRK.B), each earning a Zacks Rank #2 (Buy) and showcasing favorable earnings and stock performance figures.

CBOE, growth, finance