CME Group (CME) Has Investors Asking A Bigger Question

CME Group (CME) just posted record third quarter revenue of US$1.74b and net income of US$1.04b, supported by strong trading activity, rising market data fees and an expanding crypto derivatives lineup.

Against that backdrop, CME Group shares have climbed strongly in recent months, with a 19.72% 90 day share price return and a 15.59% 30 day gain helping lift the stock to US$305.71. The 1 year total shareholder return of 17.82% and 5 year total shareholder return of 71.01% point to momentum that has been building rather than fading.

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After a record quarter and a sharp 3 month rally, CME Group now poses a tougher question for investors: Does the current price still leave enough upside to justify the risk from here?

Most Popular Narrative: 5% Overvalued

CME Group closed at $305.71, which sits above the most followed fair value estimate of $292 that is based on a 7.93% discount rate and long term earnings assumptions.

The numbers and current valuation indicate that CME Group is fairly valued, with investors already accounting for strong margins, structural market data revenue, and potential benefits from new clearing and collateral efficiency initiatives.

See why 54 investors see CME Group as 5% overvalued.

Result: Fair Value of $292 (OVERVALUED)

Still, the narrative around CME Group could crack if rivals keep chipping away in core rate and energy contracts, or if rich valuation multiples compress on sentiment alone.

Find out about the key risks to this CME Group narrative.

Another View: What CME Group’s P/E Is Saying

That SWS DCF model flagging CME Group as expensive at $305.71 versus a $254.73 future cash flow value is only one lens. On plain P/E, CME trades at 24.9x earnings, below both the US Capital Markets industry at 38.1x and peer average at 26.3x, yet far above a fair ratio of 14.8x that the market could move toward. Is this a quality premium that persists or valuation risk that eventually bites?

To see how the earnings multiple stacks up in more detail, and what that gap to the fair ratio might mean in practice, See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

Sentiment on CME Group is divided between concern and optimism, so move quickly, review the numbers yourself, and decide where you land with the 3 key rewards and 2 important warning signs.

Looking for more CME Group sized investment ideas?

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