Intrinsic Value Cboe Global Markets, Inc. (0HQN.L)

• Previous Close: £265.56
• Intrinsic Value: £105.57
• Upside potential: -60%

Stock Valuation Context

Business Model And Market Position

Cboe Global Markets, Inc. operates as a leading global exchange network, specializing in derivatives, equities, and foreign exchange trading. The company's diversified revenue model is anchored in transaction fees, data services, and listing revenues across its five core segments: Options, North American Equities, Futures, Europe and Asia Pacific, and Global FX. Its strategic partnerships with index providers like S&P Dow Jones and MSCI enhance its product depth, particularly in index options and ETP listings. Cboe holds a dominant position in U.S. options trading, with its proprietary VIX volatility products serving as industry benchmarks. Internationally, it competes with ICE and Nasdaq through its pan-European and Asia-Pacific equities and derivatives platforms. The Global FX segment caters to institutional clients, differentiating itself via non-deliverable forwards and liquidity solutions. As a vertically integrated operator, Cboe combines exchange, clearing, and data services, reinforcing its moat in financial infrastructure.

Revenue Profitability And Efficiency

Cboe reported FY revenue of $4.09 billion, with net income of $761 million, reflecting an 18.6% net margin. Operating cash flow stood at $1.02 billion, supported by high-margin data and transaction fees. Capital expenditures were modest at $60.9 million, indicating asset-light operations. The company's revenue concentration in derivatives (notably index options) and equities trading underscores its sensitivity to trading volumes and volatility.

Earnings Power And Capital Efficiency

Diluted EPS of $7.21 demonstrates robust earnings scalability, driven by operating leverage in its exchange infrastructure. The firm's capital-light model yields high ROIC, with recurring revenue from data subscriptions (~30% of total) providing stability. Strategic acquisitions, such as BIDS Trading and EuroCCP, have expanded its equities and clearing capabilities without materially diluting returns.

Balance Sheet And Financial Health

Cboe maintains a solid liquidity position with $920.3 million in cash against $1.6 billion of total debt, equating to a manageable net leverage ratio. The balance sheet supports ongoing dividends and selective M&A, with no near-term refinancing risks. Regulatory capital requirements for its clearinghouses are adequately covered, as evidenced by consistent compliance records.

Growth Trends And Dividend Policy

Organic growth is tied to secular trends in derivatives adoption and international expansion, particularly in Asia-Pacific FX. The $2.44 annual dividend per share represents a ~35% payout ratio, balancing shareholder returns with reinvestment needs. Share count has remained stable at 105.1 million, reflecting disciplined capital allocation.

Valuation And Market Expectations

At a $24 billion market cap, Cboe trades at ~6x revenue and 31.6x P/E, pricing in premium for its monopoly-like options franchise and data moat. The low beta (0.43) suggests defensive positioning, though growth expectations are tempered by cyclical trading volumes.

Strategic Advantages And Outlook

Cboe's main competitive edge lies in its VIX index monopoly and multi-asset global footprint. Near-term headwinds include competition in European equities and FX, but its diversified model and pricing power position it well for long-term structural growth in electronic trading.

Sources

Company filings, investor presentations