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CBOE Holdings Well Poised on Business Model, Cost Control

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On Oct 6, 2015, we issued an updated research report on CBOE Holdings, Inc . CBOE .

Being the global options exchange in the U.S., CBOE Holdings is also strengthening its position in the futures business. Over the past few years, the company has significantly expanded its operations with the help of a strong business model.

Apart from ramping up its product portfolio, CBOE Holdings has successfully undertaken strong expense management that with in turn aid margin expansion. Core operating expenses are estimated between $190 million and $194 million in 2015. Over the long term, management's projection of sustained margins of +50% appears reasonable amid the rapidly changing market dynamics.

Riding on a sturdy operational profile, CBOE Holdings enjoys solid liquidity and capital position. Strong liquidity not only mitigates balance sheet risks, it also paves the way for accelerated capital deployment that enhances shareholders' value. The company's board of directors increased the dividend by 10% during the second quarter of 2015. Since its inception, CBOE Holdings has bought back shares worth $389 million, and had about $111 million worth shares available for repurchase at June end.

With respect to its earnings performance, the company, sporting a Zacks Rank #1 (Strong Buy), has delivered positive surprises in three of the last four quarters, with an average beat of 3.20%.

However, the company has been witnessing declining transaction-based revenues, the share of which in the total revenue has also been decreasing over the years. Also, intense competition due to increased market consolidation that tends to reduce market share and business leverage, and stringent regulations are the other headwinds.

CBOE Holdings has also been experiencing rising estimates over the last three months. The Zacks Consensus Estimate is currently pegged at $2.29 for 2015, reflecting an increase of 8% and $2.56 for 2016, reflecting an increase of 4.1%. The expected long-term earnings growth rate is 10.8%.

Stocks to Consider

Some better-ranked stocks from the finance sector are American Capital, Ltd ACAS , AeroCentury Corp. ACY and AerCap Holdings N.V. AER . Each of these stocks carries the same Zacks Rank as CBOE Holdings.

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AMER CAP LTD (ACAS): Free Stock Analysis Report

CBOE HOLDINGS (CBOE): Free Stock Analysis Report

AEROCENTURY CP (ACY): Free Stock Analysis Report

AERCAP HLDGS NV (AER): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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