DCF Studio

    CME · NMS · Financial Services

    CME Group Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 208.76

    Market price

    USD 276.01

    Implied upside

    -24.4%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.

    Current EV/EBITDA of 21.5x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 208.76-24.4%
    Exit multiple
    USD 329.93+19.5%
    Market price
    USD 276.01

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn3bn5bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 7.1bnUSD 7.8bnUSD 8.5bnUSD 9.2bnUSD 10.1bn+9.1%
    EBITUSD 4.5bnUSD 4.9bnUSD 5.3bnUSD 5.8bnUSD 6.3bn+9.1%
    NOPATUSD 3.5bnUSD 3.8bnUSD 4.2bnUSD 4.6bnUSD 5.0bn+9.1%
    Add depreciation & amortisationUSD 428.9mUSD 468.0mUSD 510.6mUSD 557.2mUSD 608.0m+9.1%
    Less capital expenditureUSD -106.2mUSD -115.9mUSD -126.4mUSD -138.0mUSD -150.5m+9.1%
    Less increase in working capitalUSD -101.1mUSD -110.3mUSD -120.4mUSD -131.4mUSD -143.3m+9.1%
    Free cashflow to firmUSD 3.7bnUSD 4.1bnUSD 4.5bnUSD 4.9bnUSD 5.3bn+9.1%
    Discount factor0.96360.89470.83080.77140.7162-
    Present valueUSD 3.6bnUSD 3.7bnUSD 3.7bnUSD 3.8bnUSD 3.8bn+1.3%
    Present Value Of The ForecastUSD 18.5bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.514Reported 0.275, pulled toward 1.0 (Blume)
    Cost of equity7.83%Risk-free + beta x equity risk premium
    Cost of debt5.06%Interest expense / average total debt
    Market capitalisationUSD 99.2bn96.7% of capital
    Total debtUSD 3.4bn3.3% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC7.70%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 208.76

    75% of EV

    Forecast FCFF, final year
    USD 5.3bn
    Capex at depreciation, working capital in reinvestment
    USD 5.3bn
    Less reinvestment at g/ROIC (25.8% of NOPAT)
    USD -1.4bn
    Capitalised
    USD 3.9bn
    ROIC (reported)
    9.7%
    Terminal value, undiscounted
    USD 77.6bn
    Terminal value, discounted
    USD 55.6bn
    Enterprise value
    USD 74.1bn
    Less net debt
    USD -1.1bn
    Equity value
    USD 75.2bn

    Exit at 20.0x EBITDA

    Value per shareUSD 329.93

    84% of EV

    Terminal value, undiscounted
    USD 138.6bn
    Terminal value, discounted
    USD 99.2bn
    Enterprise value
    USD 117.8bn
    Less net debt
    USD -1.1bn
    Equity value
    USD 118.9bn

    Spread between methods: 45%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    5.70%291.41308.08329.78359.30401.98
    6.70%237.19245.17254.91267.14283.02
    7.70%200.43204.27208.76214.08220.54
    8.70%173.86175.54177.42179.53181.96
    9.70%153.76154.26154.76155.26155.76

    Outlined: this model. Green text: above today's price of 276.01. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year9.1%16.2%+7.1pp
    EBIT margin62.7%84.4%+21.8pp
    Discount rate7.7%6.4%-1.3pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.