Value
3.3/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 5.2 |
| P/S | 0.0 |
| EV/EBITDA | 0.0 |
| Fwd P/E | 5.7 |
| PEG | 3.1 |
| Analyst target | 4.0 |
- ▸Forward P/E: 22.4x
- ▸PEG: 4.05
CME · Why this verdict
Why CME Group (CME) is rated HOLD
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results. How we score · Editorial policy
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VerdictHOLD
Overall score5.7/10
ConfidenceMEDIUM
MacroRISK_OFF
TrendMatrix Research · core thesis
Engine thesis — one sentence
CME Group is a best-in-class financial exchange with 63% operating margins, a wide economic moat, and a Rule of 40 score of 59 — but at a forward P/E of 20.6x and with only 3.5% upside to the consensus target, the setup offers downside of 8.6% against upside of 3.5%, making the risk/reward unfavorable for new capital at current levels.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The business generates 63% operating margins, has cleared a Rule of 40 score of 59, and carries a Piotroski F-Score of 8 out of 9 — a combination that reflects a durable competitive position rarely seen among financial-services businesses and that has sustained strong returns over multiple cycles. Quality breakdown | Operating margins remain above 58% and the Rule of 40 score stays above 50 over the next four reported quarters, confirming the franchise's durability. | ↑Improving |
| CounterWide moats in exchange businesses can erode if competition for derivatives volumes intensifies or if regulatory changes alter clearing economics; the moat score may overstate defensibility in a structurally shifting market. | ||
A forward P/E of 20.6x and a PEG ratio of 4.66 place the stock at a meaningful premium, while just 3.5% of headroom remains to the consensus price target — making the current price a poor entry point for new capital even if the underlying business continues to perform well. Valuation breakdown | The valuation thesis resolves when the forward P/E compresses below 18x or the consensus target is revised upward enough to restore double-digit upside. | ↑Improving |
| CounterHigh-quality exchange businesses with durable moats often sustain premium multiples for extended periods; a rich multiple can persist absent a catalyst for multiple compression, and a long-term holder may accept the thin near-term return. | ||
At spot, the setup offers 3.5% upside to the consensus target against 8.6% to the downside, yielding a reward-to-risk ratio of 0.59 — meaning the risk of loss more than doubles the potential gain from this entry point. Price targets | The risk/reward improves to above 1.5-to-1 as either the price corrects toward a better entry or consensus estimates are revised upward substantially. | ↑Improving |
| CounterDownside risks may not materialize if the business continues to compound steadily; a holder already in the position faces a different calculus than a new buyer, and the unfavorable geometry is primarily an entry-point concern. | ||
The dividend yield is flagged as elevated but potentially unsafe, and free cash flow sits at 71% of net income — a level that provides some cushion but leaves the payout vulnerable if earnings soften, even modestly. Catalyst breakdown | Free cash flow coverage improves such that FCF exceeds 90% of net income for 2 consecutive reported quarters, fully covering the distribution. | ↓Deteriorating |
| CounterA 71% FCF-to-net-income ratio is not extreme, and if the gap reflects non-cash accounting items rather than genuine cash shortfall, the dividend may be more secure than the flag implies. | ||
The business generates 63% operating margins, has cleared a Rule of 40 score of 59, and carries a Piotroski F-Score of 8 out of 9 — a combination that reflects a durable competitive position rarely seen among financial-services businesses and that has sustained strong returns over multiple cycles.
↑ImprovingQuality breakdown
- Expectation
- Operating margins remain above 58% and the Rule of 40 score stays above 50 over the next four reported quarters, confirming the franchise's durability.
CounterWide moats in exchange businesses can erode if competition for derivatives volumes intensifies or if regulatory changes alter clearing economics; the moat score may overstate defensibility in a structurally shifting market.
A forward P/E of 20.6x and a PEG ratio of 4.66 place the stock at a meaningful premium, while just 3.5% of headroom remains to the consensus price target — making the current price a poor entry point for new capital even if the underlying business continues to perform well.
↑ImprovingValuation breakdown
- Expectation
- The valuation thesis resolves when the forward P/E compresses below 18x or the consensus target is revised upward enough to restore double-digit upside.
CounterHigh-quality exchange businesses with durable moats often sustain premium multiples for extended periods; a rich multiple can persist absent a catalyst for multiple compression, and a long-term holder may accept the thin near-term return.
At spot, the setup offers 3.5% upside to the consensus target against 8.6% to the downside, yielding a reward-to-risk ratio of 0.59 — meaning the risk of loss more than doubles the potential gain from this entry point.
↑ImprovingPrice targets
- Expectation
- The risk/reward improves to above 1.5-to-1 as either the price corrects toward a better entry or consensus estimates are revised upward substantially.
CounterDownside risks may not materialize if the business continues to compound steadily; a holder already in the position faces a different calculus than a new buyer, and the unfavorable geometry is primarily an entry-point concern.
The dividend yield is flagged as elevated but potentially unsafe, and free cash flow sits at 71% of net income — a level that provides some cushion but leaves the payout vulnerable if earnings soften, even modestly.
↓DeterioratingCatalyst breakdown
- Expectation
- Free cash flow coverage improves such that FCF exceeds 90% of net income for 2 consecutive reported quarters, fully covering the distribution.
CounterA 71% FCF-to-net-income ratio is not extreme, and if the gap reflects non-cash accounting items rather than genuine cash shortfall, the dividend may be more secure than the flag implies.
Per-dimension breakdown
Quality
7.2/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 5.4 |
| ROA | 1.0 |
| Gross margin | 10.0 |
| Op margin | 10.0 |
| Net margin | 10.0 |
| Current ratio | 4.1 |
| FCF quality | 5.3 |
| Moat | 8.4 |
| Rule of 40 | 9.1 |
| Piotroski F | 8.9 |
- ▸Strong margins: 63%
- ▸Earnings quality warning: 69% FCF/NI
- ▸Wide economic moat
- ▸Compounder quality: strong returns + growth
Growth
5.5/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 5.8 |
| EPS growth | 5.2 |
Momentum
7.5/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.0 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 9.0 |
| Volume | 3.7 |
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
6.3/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 7.3 |
| Price target | 6.0 |
| erm sentiment | 5.0 |
Insider
5.2/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.3 |
- ▸Insider selling (low materiality) — $5,792,348 (0.005% of mkt cap)
Peer rank
6.0/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 1.8 |
| quality rank | 5.5 |
| growth rank | 8.3 |
- ▸Best-in-class margins
- ▸Industry growth leader
Technical
4.8/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 3.2 |
| support resistance | 2.6 |
| 52w position | 8.6 |
Risk (lower is worse)
6.8/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 9.2 |
| days to cover | 8.2 |
| volatility | 6.8 |
| put call | 0.0 |
| implied vol | 7.4 |
| max pain risk | 3.0 |
| beta | 10.0 |
| debt equity | 9.4 |
- ▸Elevated put/call: 8.55
- ▸Above max pain $165
Catalyst
4.7/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 6.7 |
| earnings timing | 5.0 |
| surprise avg | 3.1 |
| dividend safety | 3.5 |
- ▸Strong earnings: 3B/1M
How the verdict was assembled
Engine trigger
Maintain position. Not compelling to add more.
Engine technical detail
verdict_path:
L4:PATH_F_HOLDPassed (7)
- MOMENTUM:7.5>=5.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:95d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-0.3=NEGATIVE
Warning (0)
none
Reward-to-Risk
-0.30
Upside
-3.7%
Downside
12.3%
Sizing output
AVOID
SetupBreakout — Golden cross, above all MAs, RSI 65, MACD bullish
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
None of the engine's positive-conviction paths (C-quality, D-momentum) triggered — the F-path HOLD reflects balanced signals. Strongest-cleared gate: MOMENTUM:7.5>=5.5. Top dim: Momentum at 7.5; weakest: Value at 3.3. No conviction either direction.
The strongest dimensions are Momentum at 7.5, Quality at 7.2, and Risk (lower is worse) at 6.8; the weakest are Value at 3.3, Catalyst at 4.7, and Technical at 4.8. The V9 engine flagged 1 failed gate, producing an asymmetric reward-to-risk of -0.30 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Wide Moat Elite Margins
Trip ifOperating margin compresses below 55% for 2 consecutive reported quarters, indicating the franchise's cost advantage is eroding.
- P2Rich Valuation Thin Upside
Trip ifForward P/E compresses below 17x or upside to the consensus price target expands above 15%, restoring an attractive entry point.
- P3Unfavorable Risk Reward Geometry
Trip ifUpside to the $275.34 take-profit target expands above 12% as price corrects or consensus estimates are revised upward.
- P4Dividend Sustainability Concern
Trip ifFree cash flow as a percentage of net income rises above 90% for 2 consecutive reported quarters.