For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine CME Group Inc.’s (NasdaqGS:CME) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers.
How CME fared against its long-term earnings performance and its industry
CME’s trailing twelve-month earnings (from 31 March 2020) of US$2.4b has jumped 28% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 16%, indicating the rate at which CME is growing has accelerated. What’s the driver of this growth? Well, let’s take a look at if it is only because of industry tailwinds, or if CME Group has experienced some company-specific growth.
In terms of returns from investment, CME Group has fallen short of achieving a 20% return on equity (ROE), recording 9.0% instead. However, its return on assets (ROA) of 1.5% exceeds the US Capital Markets industry of 0.9%, indicating CME Group has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for CME Group’s debt level, has increased over the past 3 years from 7.3% to 8.1%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 13% to 13% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as CME Group gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research CME Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CME’s future growth? Take a look at our free research report of analyst consensus for CME’s outlook.
- Financial Health: Are CME’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 March 2020. This may not be consistent with full year annual report figures.
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This article by Simply Wall St is general in nature. 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. Thank you for reading.