CME Group Inc. Stock Downgraded (CME)

NEW YORK (TheStreet) -- CME Group (Nasdaq:CME) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and feeble growth in the company's earnings per share.

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Highlights from the ratings report include:

• Net operating cash flow has slightly increased to $395.60 million or 9.25% when compared to the same quarter last year. In addition, CME GROUP INC has also vastly surpassed the industry average cash flow growth rate of -99.43%.
• The gross profit margin for CME GROUP INC is rather high; currently it is at 67.50%. Regardless of CME's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CME's net profit margin of 33.90% significantly outperformed against the industry.
• CME's debt-to-equity ratio is very low at 0.10 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.18 is very weak and demonstrates a lack of ability to pay short-term obligations.
• The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Diversified Financial Services industry. The net income has significantly decreased by 41.6% when compared to the same quarter one year ago, falling from $456.60 million to $266.60 million.
• The share price of CME GROUP INC has not done very well: it is down 10.54% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

CME Group Inc. operates the CME, CBOT, NYMEX and COMEX futures exchanges worldwide. The company provides a range of products across various asset classes, such as interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, weather, and real estate. The company has a P/E ratio of 10.6, equal to the average financial services industry P/E ratio and below the S&P 500 P/E ratio of 17.7. CME Group has a market cap of $17.08 billion and is part of the financial sector and financial services industry. Shares are down 79% year to date as of the close of trading on Tuesday.

You can view the full CME Group Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

 

For more information on CME Group Inc. click any of the following:

• CME Group Inc. Stock Price

• CME Group Inc. Analyst Ratings

• CME Group Inc. Key Stats & Profile

• CME Group Inc. Earnings

• CME Group Inc. Ratio Comparison

• CME Group Inc. Growth Rates

• CME Group Inc. Balance Sheet

• CME Group Inc. Cash Flow

• CME Group Inc. Income Statement