QS Research · Michael Burry's Scion Capital analyst template · 2006
CME GROUP INC. (CME)
As of 2026-11-11 · 12/15 boxes filled from SEC filings and market data
Report price $309.09 (close 2026-11-10)
Conclusion: LONG
Conviction medium · base case +390% · downside -24% · upside +464%
At $309.09 (N1) and a $20.60B market cap (N6), CME is priced at the stated 4.7x TTM net income to common of $4.40B (N23, N12), 3.9x EV/EBITDA (S1, N11) and 0.78x book with a 16.6% ROE (N24, N21), against a six-peer median P/E of 23.05x (N35): on the same $4.40B that anchor gives $1,515.86 a share, +390%, and 15% more earnings at the same anchor gives +464% (23.05/4.7 = 4.90, x1.15 = 5.64). The base is post-deal TTM to Sep 30 2026 — revenue $6.97B, operating income $4.58B, EBITDA $4.69B, FCF $4.33B on $93.7M of capex (N8, N9, N11, N15, N14) — not an average across the $2.50B paid for deals to 2018-12-31 (N28) and not a trough, because revenue rose $4.69B FY2021, $5.02B FY2022, $5.58B FY2023, $6.13B FY2024, $6.52B FY2025, $6.97B TTM (S24). What the market discounts is dated and visible: rate per contract fell 3% to $0.679 in Q3 2026 with $123.8M of nine-month fees lost to rate after the April 1, 2026 fee changes (S29), the 10-K names FMX Futures Exchange, digital-asset platforms and prediction markets among competitors (S25), and markets priced 81.2% odds of a December 2026 Fed hike (S61). Against that, Q3 2026 was the record quarter — revenue +13% to $1,737.3M, ADV 29,445k +16%, market data a record $243.1M at a 65.7% margin on expenses up only 5% (S29, S31) — with no debt against $2.33B of cash (N18, N17) and $1.0B left on the buyback (S29). The call is long: downside is a -10% earnings base at a compressed ~4.0x P/E, which is -23.5% (0.90 x 0.85 - 1), inside the -25% limit, while the base needs only the 4.7x P/E to move toward the peer median.
Key numbers
- Share price: $309.09
- Market cap: $20.60B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $6.97B
- P/E (TTM): 4.7x
- Price / book: 0.78x
- Earnings-quality flags (TTM): none flagged
- Revenue growth (latest fiscal year): +6.4%
The 15 boxes
- ✓ 1. Long-form business notes
CME Group is a volume-driven derivatives exchange and clearing house: clearing and transaction fees were $5,281.1M of $6,520.6M FY2025 revenue (81%), with market data ($803.1M) and other ($436.4M) the rest, at a 64.9% FY2025 operating margin. Revenue scales on contracts traded (7,060.4M round turns in FY2025, average rate per contract $0.696) rather than on price per unit, while the cost base is largely fixed. The mix has shifted since FY2020: cash markets (BrokerTec/EBS) now sits inside clearing fees at $283.7M, the optimization/post-trade businesses went into the OSTTRA joint venture and were sold in Q4 2025, open outcry has shrunk to SOFR options only, and Google Cloud underpins the technology build.
- ✓ 2. Competitive advantage
CME carries the margin signature of a durable scale/liquidity advantage: operating income went from $2.64B on $4.88B revenue in FY2020 (≈54.1%, computed) to $4.23B on $6.52B in FY2025 (≈64.9%) and $4.58B on $6.97B on the TTM to 2026-09-30 (≈65.7%), with capex of only $83.5M in FY2025 and $93.7M TTM. Its 10-K claims deep, liquid markets plus clearing and settlement distinguish it and notes its systemically important market-utility and clearing-organization designations. The advantage is contested on all sides: named exchange and clearing competitors, new entrants (FMX Futures Exchange, digital asset platforms, prediction markets), and venues pricing far below EBS and BrokerTec, while a largely fixed cost base amplifies both volume upswings and downturns.
- ✓ 3. 10-Q takeaways
Q3 2026 was a record quarter: revenue $1,737.3M (+13% YoY), net income $1,036.9M (+14%), diluted EPS $2.89 GAAP and $3.02 as the release presents adjusted, on record Q3 ADV of 29,445 thousand contracts (+16%). The mix shifted against price: clearing and transaction fees rose 12% to $1,378.1M while average rate per contract fell 3% to $0.679, and operating margin still expanded to 65.7% from 63.3% because expenses grew only 5%. Cash fell to $2.2B from $4.4B at December 31, 2025 (the release cites $2.4B including $225M at FICC) while $524M of stock was repurchased and $465M of dividends paid in the quarter, with $1.0B left on the buyback authorization. Item 1A states no material changes to risk factors; neither the 10-Q MD&A nor the earnings release gives numeric guidance.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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