CBOE — Cboe Global Markets, Inc.

A split tape. The market respects the franchise — Q2 2026 (reported 2026-07-31) was a record, with revenue of $1,442.8M (net revenue $731.6M, +25% YoY), diluted EPS of $3.35 versus $2.23 a year earlier, a 19% dividend hike announced 2026-08-13, and August volume statistics showing index-options ADV +17.4% YoY alongside a record XSP ADV of 241,000 contracts — but it will no longer pay 30x for it. As of 2026-09-13 the shares sat at $281.04, down 5.81% over the past week, 3.42% over the past month, 4.70% over three months and 3.06% over six months. Analyst tone is genuinely mixed rather than bearish: consensus Hold built on 2 strong buys, 12 buys, 13 holds and 4 sells, with tracked price targets averaging roughly $317-318.5 (low $258, high $356) — i.e., the sell-side sees ~13% upside but is not pounding the table.

Revenue has climbed every single year in the window (Q3 2023 $908.8M to Q2 2026 $1,442.8M, +59%), but the path was lumpy: YoY growth ran +16.2% (Q3 2024), +24.8% (Q1 2025), then decelerated to +8.1%/+8.7%/+6.5% across Q3 2025 through Q1 2026 before snapping back to +22.9% in Q2 2026. That reacceleration looks like a real inflection rather than a blip — it coincides with record index-option volumes and a record XSP month in August 2026 — and it is corroborated by four consecutive quarters of 37%+ YoY EPS growth (Q3 2025 +37.7%, Q4 2025 +59.7%, Q1 2026 +54.4%, Q2 2026 +50.2%). Margins are the better story: operating margin ranged 21.6%-30.4% through 2023-2024, then stepped to 35.6% (Q4 2025), 39.7% (Q1 2026) and 33.0% (Q2 2026), versus 28.9% in Q2 2025; net margin went from 14.4% in Q2 2024 to 24.5% in Q2 2026. Importantly, gross margin is flat YoY (50.7% vs 50.0%), so the operating margin expansion is cost discipline and operating leverage, not a mix illusion — higher quality, but also more capped. Two honest caveats: Q1 2026's 39.7% operating margin looks like an outlier well above the 28-36% historical band, and Q2 2026 net income of $353.1M actually fell 8.4% sequentially from Q1 2026's $385.7M on 13.4% higher revenue. Extrapolating peak 39.7% margins would be a mistake.

As of 2026-09-13, CBOE trades at 21.8x TTM EPS of $12.924 — a ~31% discount to its own 5-year average P/E of 31.83x — and roughly 20.1x the $14.013 next-FY consensus EPS (~19.7x my own $14.30 FY2026E). PEG of 0.434 is the cheapest reading in the entire data set. Against that, P/S of 5.81 is a 27% premium to the 5-year average of 4.59x and P/B of 5.23x is full, so the earnings multiple looks cheap while the sales/book multiples look rich. The reconciliation is that margins have structurally expanded (35.2% operating, 26.7% net, 21.4% ROE, 15.3% ROIC), which justifies a higher sales multiple than history — but the honest verdict is fair-to-modestly-cheap on earnings power, not the bargain a 0.43 PEG implies, and not the expensive stock the P/S implies. The de-rating from ~32x to ~22x is the entire 2026 share-price story.

The stock is down ~24% from its 2026-05-13 high of $371.18 while estimates have moved UP — record Q2 2026 results, a 19% dividend hike, and August volume records. That means the drawdown is pure multiple compression, and the market is voting that peak volatility-driven volumes mean-revert, treating the +50% EPS growth as less durable than it looks. Read the next print as the referee: if Q3 2026 (late Oct/early Nov 2026) delivers another 20%+ net revenue growth quarter at a 30%+ operating margin, then ~20x forward is too low and revisions should push the shares toward the $317-328 zone. If index-option volumes roll over instead, the current multiple is roughly the right clearing price and the stock grinds sideways at best. Also note consensus looks stale — the $14.013 next-FY EPS estimate implies only ~8% growth off the $12.924 TTM base, roughly half the H1 2026 run-rate ($7.01 in two quarters).

Soft but not washed out. As of 2026-09-13, RSI(14) stood at 40.39 — weak, but above the 30 oversold threshold — with the price 5.75% below its 20-day SMA (~$298), 2.43% below its 50-day (~$288) and 1.71% below its 200-day (~$286). The 50-day and 200-day are clustered right overhead around $286-288, so a reclaim of that band would be a meaningful positive tell; failure keeps this range-bound-to-downtrend inside a 52-week range of $227.15-$371.18. Short-term momentum is clearly negative (-5.81% in a week, -3.42% in a month). Entry implication: there is no technical urgency here — no capitulation, no oversold bounce signal. Patience is free: wait for either a close back above ~$288-298 or a flush toward the $258-260 area (analyst low target) before adding.

• Volatility regime: CBOE's highest-margin revenue is SPX/VIX index options, so elevated macro and rate uncertainty is a direct volume tailwind, while a calm, low-VIX regime is the single biggest revenue headwind facing the company.
• Interest rates: $2.276B of cash as of 2026-06-30 generates net interest income that shrinks as rates are cut, though management frames this as a modest contributor relative to product adoption; lower rates also reduce the discount rate applied to a low-beta compounder.
• Sector rotation and multiple compression: a 0.41-beta, defensive financial-infrastructure name has been de-rated in 2026 as capital rotated toward higher-beta growth — the 24% drawdown from the May 2026 high is a multiple story, not an earnings story.
• Regulation and market structure: index-option licensing, SPX/VIX product exclusivity and SEC market-structure rulemaking are the biggest structural swing factors for the most profitable slice of revenue.
• Global and clearing expansion: Cboe Clear Europe's announced (2026-08-06) expansion of securities financing transactions clearing into fixed income, plus the completed Cboe Australia sale to TMX Group on 2026-07-31, reshape the revenue base away from pure US equity volatility.

• Q3 2026 earnings (typically late Oct/early Nov 2026): the next hard test of whether record index-option volumes (August 2026 ADV +17.4% YoY, record XSP ADV of 241,000 contracts) convert into another 20%+ net revenue quarter with 30%+ operating margins.
• Barclays Global Financial Services Conference on 2026-09-16: near-term management commentary on volume trends, expense discipline and capital deployment.
• Capital returns: the 19% dividend hike to $0.86/quarter (announced 2026-08-13, payable 2026-09-15) plus a net-cash balance sheet ($2.28B cash vs $794M long-term debt) leaves room for buybacks or further increases.
• Long-term debt reduction: long-term debt fell from $1.564B at 2025-12-31 to $793.9M at 2026-03-31 and $794.2M at 2026-06-30, cutting interest expense and de-risking the balance sheet.
• New revenue lines: Cboe Clear Europe's fixed-income securities financing clearing expansion (announced 2026-08-06) and continued non-transactional data/access revenue growth would diversify away from US volatility dependence.

• Revenue concentration: proprietary SPX and VIX index options drive the highest-margin growth, and a regulatory, licensing or multi-listing change to those products would hit the profit pool directly — this is the tail risk that justifies a discount to the historical multiple.
• Volatility mean reversion: record volumes are at least partly cyclical; a durable low-volatility regime would compress transaction revenue precisely when the market is already questioning durability.
• Earnings-quality optics: Q2 2026 operating cash flow was -$503.2M and free cash flow -$536.3M, giving an accruals ratio of 8.07% as of 2026-06-30 (net income running ahead of cash generation). This is most likely clearing/working-capital and balance-sheet gross-up related — current assets jumped from $2.685B to $5.927B and current liabilities from $650M to $3.787B in one quarter — but management has not explained it in the brief, and until it is explained, it is a legitimate yellow flag.
• Multiple compression is already underway: at 21.8x TTM versus a 31.83x 5-year average, a further de-rating toward the mid-teens is possible if EPS growth normalizes to single digits, which would produce a falling share price even with positive earnings.
• Sequential margin volatility (39.7% in Q1 2026 down to 33.0% in Q2 2026) plus competition from low-cost entrants in intraday/0DTE options makes extrapolating peak profitability dangerous.

This is a genuinely superior business — 35.2% operating margin, 15.3% ROIC, 21.4% ROE, a net-cash balance sheet ($2.28B cash vs $794M long-term debt as of 2026-06-30), a 0.41 beta and about 20x forward earnings against mid-teens-plus EPS growth — and the 24% drawdown from the May 2026 high has taken real froth out of the multiple. But I would not call it a screaming buy at $281.04: the deterministic score reads only Fair (55.8), the technicals are soft with price under all three moving averages, consensus is a Hold with four outright sells, the highest-margin revenue line is one regulatory headline away from repricing, and the Q2 2026 -$503M operating cash flow is an unanswered question. My fair value is roughly $326, implying ~16% upside — enough to own, not enough to chase. This is a buy-the-drawdown quality compounder: add on a reclaim of ~$288-298 or on capitulation toward $258-260, not at today's mid-range.

Growth-adjusted forward P/E on my own FY2026E EPS of $14.30 (H1 2026 actual EPS of $7.01 annualized, slightly above the $14.013 consensus) at a 23x multiple — a discount to the 5-year average P/E of 31.83x to reflect lower normalized volatility, but a premium to the market warranted by the 0.41 beta, 35.2% operating margin, 15.3% ROIC, 21.4% ROE and $1.48B net cash — gives $328.9. A simplified DCF cross-check (normalized FCF of ~$1.15B from FY2025's $1,151.7M, 10% growth for five years, 3% terminal, 8% discount rate) yields ~$320, and I split the difference at $326.