Cboe Global Markets Sees Notable 53% Yearly Surge: A Worthy Portfolio Addition?

Cboe Global Markets (CBOE) has demonstrated a remarkable performance with its stock price soaring by 52.7% over the past year, significantly surpassing the industry's 15.2%, the Finance sector's 9.5%, and the Zacks S&P 500 composite's 22% gains. The company, with a hefty market capitalization of $19.7 billion, has seen an average trading volume of 0.9 million shares in the recent three months.

The drivers behind CBOE's robust stock performance include its powerful market presence, expansive global operations, the strength of proprietary products, and a firm capital foundation, all contributing to its promising growth prospects. Reflecting the positive market sentiment, analysts have raised their earnings estimates for CBOE for the year 2024 by 1.1% over the last seven days.

Cboe Global, reigning as the largest stock exchange operator by volume in the US and a top player in global ETP trading, has a reputable record of exceeding earnings forecasts consistently in the last four reported quarters. Its earnings have seen an annual growth of 13.7% over the past five years, outpacing the industry average of 10.5%.

With a Return on Invested Capital (ROIC) consistently around 10% in recent years and considerable capital investments, CBOE showcases efficient fund utilization for generating income. It boasts a VGM Score of B, indicative of its potential through a combination of value, growth, and momentum.

Factors Fuelling CBOE's Stock Growth

CBOE's growth trajectory is underpinned by a diverse mix of businesses generating recurring revenues, growth in non-transaction recurring revenues, technological advancements, and strategic acquisitions. Analysts project a 6.1% year-over-year increase in CBOE's 2024 earnings, based on 5.6% higher predicted revenues amounting to $2 billion.

The company's long-term earnings growth rate is anticipated to be 12.8%, which is above the industry's average of 8.8%. For the years leading up to 2025, a compound annual growth rate (CAGR) of 3.3% in earnings is expected.

CBOE's organic growth is evident from its revenue trends, with estimated net top-line projected to experience a CAGR of 5.9% up to 2025. This growth is largely attributed to transaction fees that gain momentum from market volatility. Moreover, non-transaction recurring revenues are likely to keep contributing significantly to the top line.

On the inorganic growth front, CBOE has attained global service and product expansion and new revenue and cost synergies through acquisitions. The company also places emphasis on margin improvement via effective cost management.

Backed by a strong capital management strategy, CBOE has been able to fund growth investments and return capital to shareholders, highlighted by a 13-year streak of dividend increases and a 1.2% dividend yield.

Additional Finance Sector Stock Options

Other finance sector stocks worth considering include MarketAxess (MKTX), Coinbase Global (COIN), and Chubb Limited (CB), each carrying a Zacks Rank #2 (Buy). These stocks have shown promising earnings estimates and performance records, making them noteworthy candidates for finance sector investments.

Cboe, Performance, Growth