Cboe Global Markets Inc Valuation – Initial Coverage $CBOE
Company Profile (excerpt from Reuters): Cboe Global Markets, Inc., formerly CBOE Holdings, Inc., incorporated on August 15, 2006, is a holding company. The Company provides trading and investment solutions to investors around the world. It offers trading across a diverse range of products in multiple asset classes and geographies, including options, futures, United States and European equities, exchange-traded products (ETPs), global foreign exchange (FX) and multi-asset volatility products based on the Cboe Volatility Index (VIX Index).
Downloadable PDF version of this valuation:
ModernGraham Valuation of CBOE – March 2018
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
What kind of Intelligent Investor are you?
| Defensive Investor; must pass 6 out of the following 7 tests. | ||||
| 1. Adequate Size of the Enterprise | Market Cap > $2Bil | $12,612,814,613 | Pass | |
| 2. Sufficiently Strong Financial Condition | Current Ratio > 2 | 1.30 | Fail | |
| 3. Earnings Stability | Positive EPS for 10 years prior | Pass | ||
| 4. Dividend Record | Dividend Payments for 10 years prior | Fail | ||
| 5. Earnings Growth | Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end | 176.61% | Pass | |
| 6. Moderate PEmg Ratio | PEmg < 20 | 33.34 | Fail | |
| 7. Moderate Price to Assets | PB Ratio < 2.5 OR PB*PEmg < 50 | 4.05 | Fail | |
| Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor. | ||||
| 1. Sufficiently Strong Financial Condition | Current Ratio > 1.5 | 1.30 | Fail | |
| 2. Sufficiently Strong Financial Condition | Debt to NCA < 1.1 | 12.29 | Fail | |
| 3. Earnings Stability | Positive EPS for 5 years prior | Pass | ||
| 4. Dividend Record | Currently Pays Dividend | Pass | ||
| 5. Earnings Growth | EPSmg greater than 5 years ago | Pass | ||
Stage 2: Determination of Intrinsic Value
| EPSmg | $3.36 |
| MG Growth Estimate | 11.57% |
| MG Value | $106.24 |
| Opinion | Fairly Valued |
| MG Grade | D |
| MG Value based on 3% Growth | $48.67 |
| MG Value based on 0% Growth | $28.53 |
| Market Implied Growth Rate | 12.42% |
| Current Price | $111.91 |
| % of Intrinsic Value | 105.34% |
Cboe Global Markets Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.
As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.89 in 2014 to an estimated $3.36 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 12.42% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.
At the time of valuation, further research into Cboe Global Markets Inc revealed the company was trading above its Graham Number of $51.85. The company pays a dividend of $1.04 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 33.34, which was above the industry average of 25.5. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-15.28.
Cboe Global Markets Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.
Stage 3: Information for Further Research
| Net Current Asset Value (NCAV) | -$15.28 |
| Graham Number | $51.85 |
| PEmg | 33.34 |
| Current Ratio | 1.30 |
| PB Ratio | 4.05 |
| Current Dividend | $1.04 |
| Dividend Yield | 0.93% |
| Number of Consecutive Years of Dividend Growth | 8 |
Useful Links:
| ModernGraham tagged articles | Morningstar |
| Google Finance | MSN Money |
| Yahoo Finance | Seeking Alpha |
| GuruFocus | SEC Filings |
Most Recent Balance Sheet Figures
| Balance Sheet Information | 12/1/2017 |
| Total Current Assets | $434,700,000 |
| Total Current Liabilities | $334,000,000 |
| Long-Term Debt | $1,237,900,000 |
| Total Assets | $5,265,700,000 |
| Intangible Assets | $4,650,600,000 |
| Total Liabilities | $2,155,100,000 |
| Shares Outstanding (Diluted Average) | 112,600,000 |
Earnings Per Share History
| EPS History | |
| Next Fiscal Year Estimate | $4.33 |
| Dec2017 | $3.69 |
| Dec2016 | $2.27 |
| Dec2015 | $2.46 |
| Dec2014 | $2.21 |
| Dec2013 | $1.99 |
| Dec2012 | $1.78 |
| Dec2011 | $1.52 |
| Dec2010 | $1.03 |
| Dec2009 | $1.17 |
| Dec2008 | $1.24 |
Earnings Per Share – ModernGraham History
| EPSmg History | |
| Next Fiscal Year Estimate | $3.36 |
| Dec2017 | $2.75 |
| Dec2016 | $2.24 |
| Dec2015 | $2.15 |
| Dec2014 | $1.89 |
| Dec2013 | $1.66 |
| Dec2012 | $1.44 |
| Dec2011 | $1.18 |
| Dec2010 | $0.90 |
| Dec2009 | $0.72 |
| Dec2008 | $0.41 |
Recommended Reading:
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Disclaimer:
The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.
