CME Group (CME): Assessing Valuation After New Solana and XRP Futures Options Announcement

CME Group (CME) just dropped some headline-making news that is likely catching the eye of anyone watching the financial exchanges space. The company announced it will launch options on Solana and XRP futures, pending regulatory approval. This move expands its fast-growing crypto derivatives offering. Recent trading activity highlights that CME is not just dipping its toes into digital assets, but is diving into products seeing record adoption and volume, signaling a proactive approach to staying relevant in evolving markets.

This product launch comes on the heels of rapid uptake for CME’s existing Solana and XRP futures, with both contracts setting new trading records in August. Over the past year, the stock has rewarded shareholders with a return of 28%, building momentum after a softer near-term period where shares experienced some mild pullback in the past month and quarter. Company highlights, like steady revenue and net income growth, add further context for those weighing the risks and upside attached to CME’s future.

The question now is whether this latest crypto expansion has positioned the stock as a smart buy at today’s price, or if CME’s growth potential is already reflected in the current valuation.

Most Popular Narrative: 7.3% Undervalued

According to the most popular narrative, CME Group is trading below its estimated fair value, suggesting further upside based on its long-term earnings outlook and current industry trends.

“Robust international expansion, with record-breaking double-digit ADV growth across EMEA and APAC and rising participation from both institutional and retail clients globally, broadens CME’s addressable market and underpins future volume and revenue growth. The rapid acceleration of retail engagement, highlighted by a 56% increase in new retail traders and five consecutive quarters of double-digit retail client acquisition growth, diversifies CME’s client base and supports both volume and transaction-based revenue growth.”

Is CME poised for a breakout year? This narrative teases a transformative shift driven by global growth, surging new customers, and ambitious projections for revenue and profit margins. Could CME really command a valuation multiple beyond what most peers even dream of? The answer lies in the daring assumptions the pros are betting on. Are you ready to see what is fueling this bullish target?

Result: Fair Value of $282.11 (UNDERVALUED)

Have a read of the narrative in full and understand what’s behind the forecasts.

However, a period of low market volatility or rising competition from decentralized finance platforms could limit CME’s growth and challenge bullish assumptions.

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

Another View: What Does Our DCF Model Say?

While many analysts see CME Group as undervalued by current market ratios, our DCF model offers a different perspective and suggests the share price could be higher than its true worth. Which approach do you trust more?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out CME Group for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.

Build Your Own CME Group Narrative

If you have a different take or want to dig into the details yourself, you can shape your own data-backed view in just a few minutes. Do it your way

A great starting point for your CME Group research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.

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