Intrinsic value of CME Group Cl A - CME

Previous Close

$121.89

  Intrinsic Value

$43.71

stock screener

  Rating & Target

str. sell

-64%

  Value-price divergence*

-64%

Previous close

$121.89

 
Intrinsic value

$43.71

 
Up/down potential

-64%

 
Rating

str. sell

 
Value-price divergence*

-64%

Our model is not good at valuating stocks of financial companies, such as CME.

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of CME stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 40.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  8.06
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  3,595
  3,667
  3,751
  3,848
  3,956
  4,076
  4,207
  4,351
  4,506
  4,673
  4,852
  5,044
  5,249
  5,467
  5,698
  5,944
  6,205
  6,480
  6,772
  7,080
  7,406
  7,749
  8,111
  8,492
  8,894
  9,318
  9,764
  10,233
  10,727
  11,246
  11,793
Variable operating expenses, $m
 
  737
  736
  736
  735
  734
  734
  733
  732
  731
  730
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -59
  -62
  -65
Fixed operating expenses, $m
 
  688
  705
  723
  741
  759
  778
  798
  818
  838
  859
  880
  902
  925
  948
  972
  996
  1,021
  1,047
  1,073
  1,100
  1,127
  1,155
  1,184
  1,214
  1,244
  1,275
  1,307
  1,340
  1,373
  1,407
Total operating expenses, $m
  1,393
  1,425
  1,441
  1,459
  1,476
  1,493
  1,512
  1,531
  1,550
  1,569
  1,589
  852
  873
  895
  916
  939
  962
  985
  1,009
  1,034
  1,059
  1,084
  1,110
  1,137
  1,165
  1,192
  1,221
  1,250
  1,281
  1,311
  1,342
Operating income, $m
  2,203
  2,243
  2,310
  2,389
  2,480
  2,582
  2,696
  2,820
  2,956
  3,104
  3,263
  4,192
  4,375
  4,572
  4,782
  5,005
  5,243
  5,495
  5,763
  6,047
  6,347
  6,665
  7,001
  7,355
  7,730
  8,125
  8,543
  8,983
  9,446
  9,935
  10,450
EBITDA, $m
  2,428
  3,684
  3,767
  3,864
  3,975
  4,100
  4,238
  4,389
  4,554
  4,733
  4,925
  5,133
  5,355
  5,592
  5,845
  6,114
  6,401
  6,704
  7,027
  7,368
  7,729
  8,110
  8,514
  8,940
  9,389
  9,864
  10,364
  10,892
  11,448
  12,034
  12,651
Interest expense (income), $m
  85
  85
  -60
  -21
  24
  75
  131
  193
  260
  333
  411
  495
  585
  681
  783
  891
  1,007
  1,129
  1,258
  1,394
  1,539
  1,691
  1,852
  2,022
  2,200
  2,389
  2,587
  2,796
  3,016
  3,247
  3,490
Earnings before tax, $m
  2,288
  2,158
  2,371
  2,410
  2,456
  2,507
  2,564
  2,627
  2,696
  2,771
  2,852
  3,697
  3,791
  3,891
  3,999
  4,114
  4,236
  4,367
  4,505
  4,652
  4,808
  4,974
  5,149
  5,334
  5,530
  5,737
  5,956
  6,187
  6,431
  6,688
  6,960
Tax expense, $m
  754
  583
  640
  651
  663
  677
  692
  709
  728
  748
  770
  998
  1,023
  1,051
  1,080
  1,111
  1,144
  1,179
  1,216
  1,256
  1,298
  1,343
  1,390
  1,440
  1,493
  1,549
  1,608
  1,670
  1,736
  1,806
  1,879
Net income, $m
  1,534
  1,575
  1,730
  1,760
  1,793
  1,830
  1,872
  1,918
  1,968
  2,023
  2,082
  2,699
  2,767
  2,841
  2,919
  3,003
  3,093
  3,188
  3,289
  3,396
  3,510
  3,631
  3,758
  3,894
  4,037
  4,188
  4,348
  4,516
  4,694
  4,882
  5,081

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  39,495
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  69,369
  50,232
  51,387
  52,707
  54,190
  55,833
  57,636
  59,598
  61,723
  64,012
  66,469
  69,097
  71,901
  74,887
  78,061
  81,428
  84,996
  88,774
  92,768
  96,989
  101,445
  106,148
  111,106
  116,334
  121,841
  127,641
  133,749
  140,177
  146,941
  154,057
  161,543
Adjusted assets (=assets-cash), $m
  29,874
  50,232
  51,387
  52,707
  54,190
  55,833
  57,636
  59,598
  61,723
  64,012
  66,469
  69,097
  71,901
  74,887
  78,061
  81,428
  84,996
  88,774
  92,768
  96,989
  101,445
  106,148
  111,106
  116,334
  121,841
  127,641
  133,749
  140,177
  146,941
  154,057
  161,543
Revenue / Adjusted assets
  0.120
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
  0.073
Average production assets, $m
  20,123
  20,524
  20,996
  21,535
  22,141
  22,812
  23,549
  24,351
  25,219
  26,154
  27,158
  28,232
  29,378
  30,598
  31,894
  33,270
  34,728
  36,271
  37,903
  39,628
  41,449
  43,370
  45,396
  47,532
  49,782
  52,152
  54,647
  57,274
  60,037
  62,945
  66,003
Working capital, $m
  1,086
  -367
  -375
  -385
  -396
  -408
  -421
  -435
  -451
  -467
  -485
  -504
  -525
  -547
  -570
  -594
  -620
  -648
  -677
  -708
  -741
  -775
  -811
  -849
  -889
  -932
  -976
  -1,023
  -1,073
  -1,125
  -1,179
Total debt, $m
  2,231
  -1,589
  -549
  640
  1,974
  3,453
  5,075
  6,842
  8,754
  10,814
  13,025
  15,390
  17,914
  20,602
  23,458
  26,488
  29,700
  33,099
  36,694
  40,493
  44,504
  48,736
  53,199
  57,903
  62,860
  68,080
  73,577
  79,362
  85,450
  91,855
  98,591
Total liabilities, $m
  49,029
  45,208
  46,248
  47,437
  48,771
  50,250
  51,872
  53,639
  55,551
  57,611
  59,822
  62,187
  64,711
  67,399
  70,255
  73,285
  76,497
  79,896
  83,491
  87,290
  91,301
  95,533
  99,996
  104,700
  109,657
  114,877
  120,374
  126,159
  132,247
  138,652
  145,388
Total equity, $m
  20,341
  5,023
  5,139
  5,271
  5,419
  5,583
  5,764
  5,960
  6,172
  6,401
  6,647
  6,910
  7,190
  7,489
  7,806
  8,143
  8,500
  8,877
  9,277
  9,699
  10,145
  10,615
  11,111
  11,633
  12,184
  12,764
  13,375
  14,018
  14,694
  15,406
  16,154
Total liabilities and equity, $m
  69,370
  50,231
  51,387
  52,708
  54,190
  55,833
  57,636
  59,599
  61,723
  64,012
  66,469
  69,097
  71,901
  74,888
  78,061
  81,428
  84,997
  88,773
  92,768
  96,989
  101,446
  106,148
  111,107
  116,333
  121,841
  127,641
  133,749
  140,177
  146,941
  154,058
  161,542
Debt-to-equity ratio
  0.110
  -0.320
  -0.110
  0.120
  0.360
  0.620
  0.880
  1.150
  1.420
  1.690
  1.960
  2.230
  2.490
  2.750
  3.010
  3.250
  3.490
  3.730
  3.960
  4.180
  4.390
  4.590
  4.790
  4.980
  5.160
  5.330
  5.500
  5.660
  5.820
  5.960
  6.100
Adjusted equity ratio
  -0.641
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,534
  1,575
  1,730
  1,760
  1,793
  1,830
  1,872
  1,918
  1,968
  2,023
  2,082
  2,699
  2,767
  2,841
  2,919
  3,003
  3,093
  3,188
  3,289
  3,396
  3,510
  3,631
  3,758
  3,894
  4,037
  4,188
  4,348
  4,516
  4,694
  4,882
  5,081
Depreciation, amort., depletion, $m
  225
  1,441
  1,457
  1,475
  1,495
  1,517
  1,542
  1,569
  1,598
  1,629
  1,662
  941
  979
  1,020
  1,063
  1,109
  1,158
  1,209
  1,263
  1,321
  1,382
  1,446
  1,513
  1,584
  1,659
  1,738
  1,822
  1,909
  2,001
  2,098
  2,200
Funds from operations, $m
  1,713
  3,016
  3,187
  3,234
  3,288
  3,348
  3,414
  3,487
  3,566
  3,652
  3,744
  3,640
  3,746
  3,861
  3,982
  4,112
  4,250
  4,397
  4,552
  4,717
  4,892
  5,076
  5,272
  5,478
  5,696
  5,926
  6,169
  6,425
  6,696
  6,981
  7,281
Change in working capital, $m
  -3
  -7
  -8
  -10
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -45
  -47
  -49
  -52
  -55
Cash from operations, $m
  1,716
  3,023
  3,196
  3,244
  3,299
  3,360
  3,427
  3,501
  3,581
  3,668
  3,762
  3,659
  3,767
  3,882
  4,006
  4,137
  4,276
  4,424
  4,581
  4,748
  4,924
  5,111
  5,308
  5,516
  5,736
  5,969
  6,214
  6,472
  6,745
  7,033
  7,336
Maintenance CAPEX, $m
  0
  -671
  -684
  -700
  -718
  -738
  -760
  -785
  -812
  -841
  -872
  -905
  -941
  -979
  -1,020
  -1,063
  -1,109
  -1,158
  -1,209
  -1,263
  -1,321
  -1,382
  -1,446
  -1,513
  -1,584
  -1,659
  -1,738
  -1,822
  -1,909
  -2,001
  -2,098
New CAPEX, $m
  -92
  -401
  -472
  -540
  -606
  -671
  -737
  -802
  -868
  -935
  -1,004
  -1,074
  -1,146
  -1,220
  -1,297
  -1,376
  -1,458
  -1,543
  -1,632
  -1,724
  -1,821
  -1,921
  -2,026
  -2,136
  -2,250
  -2,370
  -2,495
  -2,626
  -2,764
  -2,908
  -3,058
Cash from investing activities, $m
  54
  -1,072
  -1,156
  -1,240
  -1,324
  -1,409
  -1,497
  -1,587
  -1,680
  -1,776
  -1,876
  -1,979
  -2,087
  -2,199
  -2,317
  -2,439
  -2,567
  -2,701
  -2,841
  -2,987
  -3,142
  -3,303
  -3,472
  -3,649
  -3,834
  -4,029
  -4,233
  -4,448
  -4,673
  -4,909
  -5,156
Free cash flow, $m
  1,770
  1,952
  2,040
  2,004
  1,975
  1,950
  1,930
  1,914
  1,902
  1,893
  1,887
  1,680
  1,680
  1,683
  1,689
  1,698
  1,709
  1,723
  1,740
  1,760
  1,782
  1,808
  1,836
  1,867
  1,902
  1,939
  1,980
  2,024
  2,072
  2,124
  2,179
Issuance/(repayment) of debt, $m
  130
  -3,820
  1,040
  1,189
  1,334
  1,479
  1,622
  1,767
  1,912
  2,060
  2,211
  2,365
  2,524
  2,687
  2,856
  3,031
  3,212
  3,400
  3,595
  3,799
  4,011
  4,232
  4,463
  4,704
  4,957
  5,220
  5,496
  5,785
  6,088
  6,405
  6,737
Issuance/(repurchase) of shares, $m
  52
  2,890
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  193
  -930
  1,040
  1,189
  1,334
  1,479
  1,622
  1,767
  1,912
  2,060
  2,211
  2,365
  2,524
  2,687
  2,856
  3,031
  3,212
  3,400
  3,595
  3,799
  4,011
  4,232
  4,463
  4,704
  4,957
  5,220
  5,496
  5,785
  6,088
  6,405
  6,737
Total cash flow (excl. dividends), $m
  1,963
  1,023
  3,079
  3,193
  3,309
  3,429
  3,552
  3,681
  3,814
  3,953
  4,098
  4,045
  4,204
  4,370
  4,545
  4,728
  4,921
  5,123
  5,335
  5,559
  5,793
  6,040
  6,299
  6,572
  6,858
  7,160
  7,477
  7,810
  8,160
  8,528
  8,916
Retained Cash Flow (-), $m
  211
  -4,465
  -116
  -132
  -148
  -164
  -180
  -196
  -212
  -229
  -246
  -263
  -280
  -299
  -317
  -337
  -357
  -378
  -399
  -422
  -446
  -470
  -496
  -523
  -551
  -580
  -611
  -643
  -676
  -712
  -749
Prev. year cash balance distribution, $m
 
  19,783
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  16,340
  2,964
  3,061
  3,161
  3,265
  3,372
  3,484
  3,601
  3,724
  3,852
  3,782
  3,924
  4,072
  4,228
  4,392
  4,564
  4,745
  4,936
  5,137
  5,348
  5,570
  5,803
  6,049
  6,308
  6,580
  6,866
  7,167
  7,484
  7,817
  8,167
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  15,667
  2,713
  2,664
  2,603
  2,531
  2,447
  2,354
  2,251
  2,139
  2,019
  1,796
  1,674
  1,548
  1,419
  1,289
  1,160
  1,032
  909
  791
  680
  576
  482
  396
  321
  256
  200
  154
  116
  85
  61
Current shareholders' claim on cash, %
  100
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0
  28.0

CME Group Inc., through its subsidiaries, operates contract markets for the trading of futures and options on futures contracts worldwide. The company offers a range of products across various asset classes, based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, and metals. Its products include exchange-traded; and privately negotiated futures and options contracts and swaps. It executes trade through its electronic trading platforms, open outcry, and privately negotiated transactions, as well as provides hosting, connectivity, and customer support for electronic trading through its co-location services. The company also provides clearing and settlement services for exchange-traded contracts, as well as for cleared swaps; and regulatory reporting solutions for market participants through its global repository services in the United States, the United Kingdom, Canada, and Australia. In addition, the company offers a range of market data services, including live quotes, delayed quotes, market reports, and historical data service, as well as index services. CME Group Inc. serves professional traders, financial institutions, institutional and individual investors, corporations, manufacturers, producers, governments, and central banks. The company was formerly known as Chicago Mercantile Exchange Holdings Inc. and changed its name to CME Group Inc. in July 2007. CME Group Inc. was founded in 1898 and is headquartered in Chicago, Illinois.

FINANCIAL RATIOS  of  CME Group Cl A (CME)

Valuation Ratios
P/E Ratio 26.9
Price to Sales 11.5
Price to Book 2
Price to Tangible Book
Price to Cash Flow 24
Price to Free Cash Flow 25.4
Growth Rates
Sales Growth Rate 8.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -19.3%
Cap. Spend. - 3 Yr. Gr. Rate -6.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 11%
Total Debt to Equity 11%
Interest Coverage 28
Management Effectiveness
Return On Assets 2.3%
Ret/ On Assets - 3 Yr. Avg. 2%
Return On Total Capital 6.8%
Ret/ On T. Cap. - 3 Yr. Avg. 5.7%
Return On Equity 7.5%
Return On Equity - 3 Yr. Avg. 6.3%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 72.3%
EBITDA Margin - 3 Yr. Avg. 69.5%
Operating Margin 61.3%
Oper. Margin - 3 Yr. Avg. 59.3%
Pre-Tax Margin 63.6%
Pre-Tax Margin - 3 Yr. Avg. 59.8%
Net Profit Margin 42.7%
Net Profit Margin - 3 Yr. Avg. 38.8%
Effective Tax Rate 33%
Eff/ Tax Rate - 3 Yr. Avg. 35.2%
Payout Ratio 116.5%

CME stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CME stock intrinsic value calculation we used $3595 million for the last fiscal year's total revenue generated by CME Group Cl A. The default revenue input number comes from 2016 income statement of CME Group Cl A. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CME stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for CME is calculated based on our internal credit rating of CME Group Cl A, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of CME Group Cl A.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CME stock the variable cost ratio is equal to 20.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $671 million in the base year in the intrinsic value calculation for CME stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.8% for CME Group Cl A.

Corporate tax rate of 27% is the nominal tax rate for CME Group Cl A. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CME stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CME are equal to 559.7%.

Life of production assets of 123.1 years is the average useful life of capital assets used in CME Group Cl A operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CME is equal to -10%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $20341 million for CME Group Cl A - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 335.564 million for CME Group Cl A is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of CME Group Cl A at the current share price and the inputted number of shares is $40.9 billion.

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COMPANY NEWS

▶ CME to offer repo-backed futures and options   [Jul-26-17 11:29AM  Reuters]
▶ Israeli data analytics firm iguazio raises $33 mln   [Jul-25-17 07:00AM  Reuters]
▶ [$$] Thin Trading Hobbles Online Cattle Auction   [Jun-22-17 12:35AM  The Wall Street Journal]
▶ CFTC fines U.S. cattle futures traders $5 million   [Jun-21-17 02:25PM  Reuters]
▶ Fast Money final trades: SBUX, DAL & more   [May-25-17 05:59PM  CNBC Videos]
▶ [$$] CME Chairman and CEO Terrence Duffy Suffers Collapsed Lung   [May-24-17 02:07PM  The Wall Street Journal]
▶ CME Group Declares Dividend   [May-23-17 05:56PM  PR Newswire]
▶ [$$] CME Reaps the Benefits of Its Interest-Rates Empire   [12:52AM  The Wall Street Journal]
▶ [$$] CME Reaps the Benefits of Its Interest-Rates Empire   [May-22-17 10:06AM  The Wall Street Journal]
▶ ETFs with exposure to CME Group, Inc. : May 18, 2017   [May-18-17 01:36PM  Capital Cube]
▶ [$$] ICE held talks with US rival CME over exchanges merger   [May-03-17 02:55PM  Financial Times]
▶ [$$] CME spooks investors with warning on market data   [Apr-27-17 01:28PM  Financial Times]
▶ CME tops 1Q profit forecasts   [07:22AM  Associated Press]
▶ Luxury Homeowners Hold Out to Find a Buyer   [Apr-13-17 11:26AM  MarketWatch]
▶ [$$] U.S. Futures Giant CME Group Pulls Back From Europe   [12:01AM  The Wall Street Journal]
▶ [$$] U.S. Futures Giant CME Group Pulls Back From Europe   [12:10PM  The Wall Street Journal]
▶ Bank Stocks Most Closely Linked to Trump's Approval Rating   [03:38PM  The Wall Street Journal]
▶ SGX Said to Have Held Discussions With Nasdaq, CME   [Mar-31-17 12:17AM  Bloomberg Video]
▶ [$$] ICE, S&P to Launch LNG Derivative Contracts   [Mar-22-17 09:07AM  at The Wall Street Journal]
Stock chart of CME Financial statements of CME Annual reports of CME
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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