Value
3.8/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 6.0 |
| P/S | 0.9 |
| EV/EBITDA | 0.3 |
| Fwd P/E | 6.5 |
| PEG | 2.8 |
| Analyst target | 5.0 |
- ▸Forward P/E: 19.7x
- ▸PEG: 4.46
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.
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VerdictHOLD
Overall score5.2/10
ConfidenceMEDIUM
MacroNEUTRAL
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. | →Stable |
| 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. | ↓Deteriorating |
| 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. | Tripped↓Deteriorating |
| 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. | ↑Improving |
| 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.
→StableQuality 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.
↓DeterioratingValuation 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.
Tripped↓DeterioratingPrice 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.
↑ImprovingCatalyst 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
7.1/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 5.3 |
| ROA | 1.0 |
| Gross margin | 10.0 |
| Op margin | 10.0 |
| Net margin | 10.0 |
| Current ratio | 4.1 |
| Moat | 7.2 |
| Piotroski F | 8.9 |
- ▸Strong margins: 63%
- ▸Strong Piotroski F-Score: 8/9
Growth
2.6/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 2.7 |
| EPS growth | 2.5 |
Momentum
5.5/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 2.9 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 4.5 |
| Volume | 0.2 |
- ▸Overbought bear rally (RSI 71)
- ▸Volume accumulation (rising OBV)
- ▸Below 200-MA, MA slope flat
Sentiment
6.5/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 5.6 |
| Analyst rating | 7.3 |
| Price target | 6.6 |
Insider
7.3/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 10.0 |
| notable moves | 7.0 |
- ▸Insider selling (low materiality) — $12,200,402 (0.013% of mkt cap)
- ▸Institutions accumulating
Peer rank
4.8/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 2.7 |
| quality rank | 6.5 |
| growth rank | 0.9 |
- ▸Best-in-class margins
- ▸Conservative debt levels
Technical
2.6/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 1.2 |
| support resistance | 0.6 |
| 52w position | 6.0 |
Risk (lower is worse)
7.8/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 9.1 |
| days to cover | 9.5 |
| volatility | 5.5 |
| put call | 6.4 |
| implied vol | 6.3 |
| beta | 10.0 |
| debt equity | 9.5 |
| news risk | 6.0 |
Catalyst
5.2/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 6.5 |
| earnings history | 6.7 |
| earnings timing | 5.0 |
| surprise avg | 3.2 |
| dividend safety | 2.0 |
| news activity | 8.0 |
- ▸Strong earnings: 3B/1M
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position. | News modifier +2 (SELL_IF_HOLDING → HOLD_IF_HOLDING).
Engine technical detail
verdict_path:
L4:PATH_F_SELL|L3:NEWS_MOD=+2Passed (6)
- MOMENTUM:5.5>=5.5
- INSIDER:OK
- 8K:CLEAN
- EARNINGS_PROXIMITY:88d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:0.0<1.5@spot
Warning (1)
- DEATH_CROSS:momentum=5.5>=5.0 recovering
Reward-to-Risk
0.01
Upside
+0.1%
Downside
14.5%
Sizing output
AVOID
SetupRecovery — Death cross but MACD improving, RSI 71
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 5.2 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Risk (lower is worse) at 7.8) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:0.0<1.5@spot) reinforce the read. Current asymmetry R:R is 0.01 — supplementary context, not the trigger for this path.
The strongest dimensions are Risk (lower is worse) at 7.8, Insider at 7.3, and Quality at 7.1; the weakest are Technical at 2.6, Growth at 2.6, and Value at 3.8. The V9 engine flagged 1 failed gate with 1 warning, producing an asymmetric reward-to-risk of 0.01 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 GeometryTripped
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.