- By John Engle
Even if you have never heard of the CME Group (CME), you have definitely heard of its assets and services. CME is the world"s largest futures and options exchange and the majority owner of the Dow Jones Industrial Average. And its stock is really heating up.
Here"s the question investors have to ask about this hot stock is: Will it warm their portfolios through a cold winter, or burn them out?
-
Warning! GuruFocus has detected 4 Warning Sign with CME. Click here to check it out.
-
The intrinsic value of CME
Let"s see if we can do something to answer than question.
Taking a look at the numbers
CME shares closed on Friday, December 1st at just over $150; that"s the highest close in the stock"s history. Any time a stock hits an all-time high its bound to make a value-oriented investor sweat. It might even make a growth stock chaser a bit hot under the collar. Yet despite the heat, CME deserves a closer look before we decide to run for the exits.
Financially, CME sits in a strong position with high growth, innovation, not overly high debt to equity, and strong earnings per share. Over the past four quarters, CME has beaten consensus earnings estimates, albeit never by much more than 5%. With strong growth, continued improvement of offerings, strong performance by its exchanges, and solid trading volume, CME looks quite well positioned to continue an upward trajectory.
Let"s next take a look at some of the highlights that could make the case for CME.
On the plus side
Here are four things we see as positive signs moving forward:
-
Swirling around the financial reporting world is news of CME"s introduction of Bitcoin futures which will be launching soon, a sign of its continued drive to innovate and offer its customers new and exciting products. If CME keeps investors and the market on their toes, they will see prolonged upward performance. Keep your eyes and ears peeled for more news on their offerings.
-
As the market sees volatility increasing - especially with the ouster of Janet Yellen and historic stock growth that is worrying more and more investors and economists about an imminent correction - CME is in a strong position to take advantage of the uncertain times. As markets get more volatile, the volume of derivatives generally increase, which is certainly good for CME.
-
Less excitingly, but still importantly, CME is adjusting its dividends, increasing its regular and special dividends to shareholders. A little more money in your pocket around the holidays? Who wouldn"t take that?
-
Financially, CME looks solid. Margins, both operating and net, continue to improve as trading volume on CME"s exchanges increases in these highly bullish times. This pushes operating and net margins up, the former which is performing at well over 50%.