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Cboe Global (CBOE) Stock Up 37% YTD: More Room for Upside?

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Shares of Cboe Global Markets (CBOE - Free Report) have gained 36.7% year to date compared with the industry and the Finance sector’s rally of 18.5% and 21%, respectively. The Zacks S&P 500 composite has increased 21.7% in the said time frame. With a market capitalization of $13.6 billion, the average volume of shares traded in the last three months was 0.7 million.

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Strong market position, global reach, strength in its proprietary products, and solid capital position continue to drive Cboe Global. It has a decent track of beating earnings estimates in three of the last four quarters, missing in one, with the average surprise being 3.80%.

Return on equity in the trailing 12 months was 16.7%, better than the industry average of 12.8%.  

The Zacks Consensus Estimate for 2021 and 2022 earnings has moved up by 1 cent and 2 cents respectively, in the past 30 days, reflecting analysts’ optimism.

Will the Bull Run Continue?

The Zacks Consensus Estimate for 2021 indicates a year-over-year improvement of 4.6% on 11.4% higher revenues. The consensus estimate for 2022 indicates a year-over-year improvement of 2.3% on 2.8% higher revenues.

The company envisions to be the largest global derivatives and securities network. It plans to invest about $25 million in organic growth initiatives in 2021.

Cboe Global’s top line continues to exhibit improvement. Trading volatility aiding volume growth should increase transaction fees. Its strong market position and a global reach, with strength in its proprietary products primarily SPX options, VIX options, and VIX futures, should keep the growth momentum alive.

Access and capacity fees plus proprietary market data are expected to increase 7% to 8% in 2021. In the mid-to-longer term, the company estimates organic top-line compounded average growth of 4% to 6%.

Cboe Global Markets boasts a compelling inorganic growth story, given its prudent acquisitions. While the buyout of MATCHNow helped it to venture into Canada, the buyout of BIDS Trading provides a meaningful presence in the substantial off-exchange segment of the U.S. equities market. Cboe Global estimates net revenue contribution from recent acquisitions in the range of 4% to 6%. It has acquired Chi-X Asia Pacific Holdings to expand its global equities business into the Asia Pacific region.

It remains focused on expanding its BIDS trading platform and plans to launch BIDS in Canada in February next year and expand the BIDS network to the Asia Pacific in 2022.

It is exploring new markets like the Middle East and Scandinavia while pursuing jurisdictional approval in more established markets, including Switzerland and Israel.

Boasting the largest stock exchange operators by volume in the United States and a leading market globally for ETP trading, this Zacks Rank #3 (Hold) company is accelerating non-transaction revenue growth. It estimates recurring non-transactional organic revenue growth of 12-13% in 2021, up from 10-11% guided earlier.

Riding on a solid capital position, it has hiked dividend each year since its IPO and increased the same at a five-year CAGR of 13%. It also has $318.9 million remaining under its existing share repurchase authorization.

Cboe Global has a favorable Growth Score of B. This style score analyzes the growth prospect of a company.

Stocks to Consider

Some better-ranked stocks include Nasdaq (NDAQ - Free Report) , OTC Markets Group (OTCM - Free Report) , and Apollo Global Management (APO - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Nasdaq delivered an earnings surprise of 9.83% in the last reported quarter.

OTC Markets Group delivered an earnings surprise of 47.50% in the last reported quarter.

Apollo Global delivered an earnings surprise of 48.05% in the last reported quarter.