CME Group CME has been trading above its 50-day simple moving average (SMA), signaling a short-term bullish trend. Its share price, as of Jan. 6, 2025, was $225.82, down 9.3% from its 52-week high of $249.02.
The 50-day SMA is a key indicator for traders and analysts to identify support and resistance levels. It is considered particularly important as this is the first marker of an uptrend or downtrend.
CME is the largest futures exchange in the world in terms of trading volume as well as notional value traded. Efforts to expand futures products in emerging markets, diversify derivative product lines and global reach, its OTC offerings, increased electronic trading, cross-selling through alliances, strong global presence and solid liquidity position CME Group for growth.
CME Price Movement vs. 50-Day Moving Average
Image Source: Zacks Investment Research
Price Performance of CME
Shares of CME have gained 1.9% in the past three months, outperforming the industry’s 0.7% decrease but underperforming the Finance sector’s growth of 3.3% and the Zacks S&P 500 composite’s gain of 4.1% in the same time frame.
CME Vs. Industry, Sector and S&P 500 in 3-Months
Image Source: Zacks Investment Research
Based on short-term price targets offered by 16 analysts, the Zacks average price target is $243.63 per share. The average suggests a potential 4.8% upside from Monday’s closing price.
Optimistic Growth Projection
The Zacks Consensus Estimate for 2025 earnings indicates a year-over-year improvement of 1.6% on 3.4% higher revenues of $6.4 billion. The expected long-term earnings growth rate is pegged at 4.8%.
The Zacks Consensus Estimate for 2025 earnings has moved 2 cents north in the past seven days.
Factors Favoring CME
CME Group’s strength lies in organic growth. An exchange always benefits from increased volatility that drives trading volume, which in turn drives clearing and transaction fees. Average daily volume reached a record 26.5 million contracts in 2024, a 9% year-over-year increase.
Clearing and transaction fees contribute a major share to the top line. Increasing clearing and transaction fees should continue to boost the top line.
The company is witnessing growth in electronic trading volume and higher adoption of crypto assets with increased interest across the entire crypto economy. With Trump’s second term, pro-crypto environment and easing regulatory control, CME is poised to grow.
CME’s investments are also showing desirable results. The company is focusing on improving margins through cost management.
A solid capital position continues to support CME Group in accelerating organic market data growth, expanding its product breadth and engaging in capital deployment.
Its free cash flow conversion has remained more than 85% over the last few quarters, reflecting its solid earnings.
CME’s Return on Capital
CME’s return on equity (ROE) has been improving over the last many years, reflecting its efficiency in utilizing shareholders’ funds. The trailing 12 months ROE was 13.4%, which compared favorably with the industry average of 13.3%.
Return on invested capital (ROIC) hovered around 10% over the last few years, reflecting CME’s efficiency in utilizing funds to generate income. However, ROIC in the trailing 12 months was 0.8%, comparing unfavorably with the industry’s average of 5%.
CME Shares are Cheap
Shares are trading at a discount to the Zacks Securities and Exchange industry. CME’s forward price-to-earnings of 21.73X is lower than the industry average of 22.94X.
The stock remains attractively valued compared with other players like ICE Intercontinental Exchange Inc ICE and Cboe Global Markets CBOE.
Parting Thoughts on CME
A strong global presence, a compelling product portfolio, focus on over-the-counter clearing services and a solid capital position poise the company well for growth.
CME’s dividend history is impressive too. It pays five dividends per year, with the fifth being variable and based on excess cash flow in a year, making it an attractive pick for yield seeking investors. Given its affordability, it is wise to add this Zacks Rank #2 (Buy) stock to your portfolio now.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Intercontinental Exchange Inc. (ICE) : Free Stock Analysis Report
CME Group Inc. (CME) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
