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Taking these key indicators into account, the Excess Returns model calculates an intrinsic value for CME Group that is 37.1% below the current share price. This suggests the stock is substantially overvalued by this measure.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for CME Group.

Our Excess Returns analysis suggests CME Group may be overvalued by 37.1%. Find undervalued stocks or create your own screener to find better value opportunities.

For established, profitable companies like CME Group, the Price-to-Earnings (PE) ratio is widely considered one of the most reliable valuation methods. It captures how much investors are willing to pay for each dollar of current earnings, offering a straightforward gauge of market sentiment around profitability and future growth prospects.

The appropriate or “fair” PE ratio is not a one-size-fits-all number. It shifts based on factors such as expected earnings growth, perceived risks, and broader industry trends. Higher growth and stability often warrant a higher PE, while risk and competitive pressures can bring it lower.

Currently, CME Group trades at a PE ratio of 25.9x. That places it exactly in line with the broader capital markets industry average of 25.9x, but well below the average of its peer group, which sits at 33.8x. On the surface, this might suggest a reasonable or even conservative valuation compared to peers.

However, Simply Wall St’s “Fair Ratio” offers a deeper perspective by factoring in CME’s unique attributes, including its earnings quality, growth forecast, profit margins, its market cap, and the risks specific to this business. Unlike a simple industry or peer comparison, the Fair Ratio captures a more nuanced base case for what multiple a business should trade at in light of all these realities. For CME, the Fair Ratio currently stands at 17.7x, meaning its market price is well above what these fundamentals suggest is justified.

Comparing the Fair Ratio of 17.7x to the current PE of 25.9x, CME Group’s stock is trading at a significant premium, indicating it is overvalued on this basis.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is simply your story behind the numbers—your personal perspective about where CME Group is headed, expressed through your own fair value and estimates for future revenue, earnings, and profit margins.

Rather than just relying on historic figures or generic multiples, Narratives link your outlook on the company and its industry to an actual financial forecast. From there, you arrive at a Fair Value that reflects your unique view. Narratives are easy to create and explore on Simply Wall St’s platform within the Community page, where millions of investors together bring diverse insights and evolving perspectives.

By setting your own Narrative, you can instantly see how your fair value compares to the current price, helping you decide if it is time to buy, sell, or hold. Narratives refresh dynamically as new news or results come in, so you are always working with up-to-date information.

For example, some investors using Narratives see CME Group fairly valued as high as $313, citing strong international expansion and retail growth. Others set targets as low as $212, factoring in competition and technology risks.

Do you think there’s more to the story for CME Group? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include CME.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com