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Cboe Global Markets Stock in Growth Groove: Wise to Hold?

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Cboe Global Markets, Inc. (CBOE - Free Report) remains well-poised for growth, banking on compelling product portfolio, prudent acquisitions and effective capital deployment.

Estimates for the Zacks Rank #3 (Hold) options exchange have been revised upward over the past 30 days, reflecting analysts’ confidence in the stock post solid second-quarter 2018 results. The Zacks Consensus Estimate for 2018 earnings has been moved 0.2% north to $4.53 and 1% to $4.58 for 2019.

Shares of Cboe Global have gained 6.5% since it reported quarterly results, outperforming its industry’s increase of 6% as well as the Zacks S&P 500 Composite’s rise of 2.1%.



Cboe Global remains well-placed for garnering improved returns over a long term, backed by several growth factors.

Robust Top line: Increasing transaction fees driven by trading volume growth has been driving revenues higher over the last several years. Prudent acquisitions have also been supporting this upside.

A strong market position and a global reach combined with strength in its proprietary products, primarily SPX options, VIX options and VIX futures, should continue to keep the momentum alive.

Contribution of Bats Acquisition: Bats Global expands and diversifies Cboe Global’s product portfolio with the addition of U.S. and European cash equities, Global ETPs and Global FX, thus widening its global reach with solid pan-European equities and global FX positions. The transaction also opened non-transactional revenue generating avenues for Cboe Global.

The company raised its projected annualized run rate expense synergy target to $85 million from $60 million. It expects to achieve this run rate in 2020, a year earlier than the initial estimate.

Effective Capital Deployment: Driven by operational efficiencies, Cboe Global engages in disciplined capital deployment. While the latest 15% hike in dividend marks the eighth consecutive year of dividend increases, the raised share buyback authorization by $100 million marks the second increase in share buyback program in 2018. The company had $225 million remaining under its existing share repurchase program as of Aug 1, 2018. These endeavors make the stock an attractive pick for yield-seeking investors.

Growth Score: The stock carries a favorable Growth Score of B. Growth Score analyzes a company’s growth prospects.

Better Return on Equity: CBOE Global’s return on equity — a measure of profitability — is 14.2%, higher than the industry average of 10.9%. This reflects the company’s prudent usage of shareholders’ funds.

Growth Projections: The Zacks Consensus Estimate for earnings per share in 2018 is expected to surge 32.5% on 0.3% higher revenues.  The consensus mark is projected to improve nearly 7% as revenues rise 1.8%. The expected long-term earnings growth rate stands at 11.8%, much above the industry average of 8.8%.

Positive Earnings Surprise History: Cboe Global surpassed the Zacks Consensus Estimate in three of the last four quarters with an average beat of 2.46%.

Stocks to Consider

Some better-ranked stocks from the finance sector are The Progressive Corporation (PGR - Free Report) , Cigna Corp. (CI - Free Report) and Radian Group Inc. (RDN - Free Report) .

Progressive Corporation provides personal and commercial auto insurance, residential property insurance and other specialty property-casualty insurance as well as related services, primarily in the United States. The company delivered an average four-quarter positive surprise of 9.19%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.  

Cigna is one of the largest investor-owned health service organizations in the United States. The company came up with an average four-quarter earnings surprise of 15.61%.The stock carries a Zacks Rank #2 (Buy).

Radian Group offers mortgage and real estate products and services in the United States. The company pulled off an average four-quarter beat of 15.61%. The stock holds a Zacks Rank of 2.

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