Here's Why You Should Hold Onto Cboe Global Markets Stock

Cboe Global Markets, Inc. (NASDAQ:CBOE) remains well-poised for growth, banking on strength in proprietary products and solid market position. This Zacks Rank #3 (Hold) options exchange bears immense potential owing to a few good growth drivers.

Growth Projections: The Zacks Consensus Estimate for earnings per share is pegged at $3.41 for 2017 and at $4.02 for 2018. The consensus mark for 2017 reflects a year-over-year increase of 41% while the same for 2018 improved 17.9%.

The top line is estimated to rise 54.6% and 13.9%, respectively, in 2017 and 2018.

The expected long-term earnings growth rate is pegged at 17.4%, much higher than the industry average of 11.3%.

Estimate Revisions: The stock has seen the Zacks Consensus Estimate for current-year earnings being moved 0.9% south in the last 60 days. However, recent positive revisions saw the 2018 earnings being inched up 0.8% over the same time frame.

Positive Earnings Surprise History: Cboe Global has surpassed the Zacks Consensus Estimate in the last four quarters with an average beat of 5.5%.

Price Performance: Shares of Cboe Global have soared 67.9% year to date, substantially outperforming the industry’s 29.7% rally.

Stretched Valuation: Looking at the company’s price-to-book ratio — the best multiple for valuing securities exchanges because of large variations in their earnings results from one quarter to the next — shares are overpriced at the current level. The company has a trailing 12-month P/B ratio of 4.86, significantly higher than the industry average of 2.87.

Growth Drivers in Place

Cboe Global benefits from increasing transaction fees that in turn are driven by trading volume growth. The company is well-poised to retain this momentum, given its strong market position and a global reach with strength in proprietary products, primarily SPX options, VIX options and VIX futures.

To gain from the emerging cryptocurrency trend, the company has already begun trading bitcoin futures this December.

Its inorganic story remains impressive as strategic acquisitions diversify the product portfolio and generates expense synergies. Cboe Global anticipates to achieve $50 million in annualized expense synergies from the Bats Global buyout within three years of the acquisition and increased its targeted annualized GAAP run rate synergies to $30 million for 2017.

A strong financial position aids the company to return value to shareholders through dividend hikes as well as pursue growth initiatives. Cboe Global also has been effectively lowering its leverage ratio. Strong liquidity not only mitigates balance sheet risks but also paves the way for an accelerated capital deployment.

Stocks to Consider

Some better-ranked stocks from the finance sector are Cigna Corp. (NYSE:CI) , Radian Group Inc. (NYSE:RDN) and Prudential Financial, Inc. (NYSE:PRU) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cigna is one of the largest investor-owned health service organizations in the United States. The company delivered positive surprises in all the last four quarters with an average beat of 14.56%.

Radian Group offers mortgage and real estate products and services in the United States. The company pulled off positive surprises in three of the last four quarters with an average beat of 4.52%.

Prudential Financial provides insurance, investment management and other financial products and services in the United States and internationally. The company came up with positive surprises in three of the last four quarters with an average beat of 0.16%.

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