Cboe Global Markets (CBOE) has drawn fresh attention after launching Cboe Predicts, a new suite of prediction markets built around binary option contracts on the Mini S&P 500 Index, aimed at retail traders.

That launch comes after a choppy stretch for Cboe Global Markets, with the share price at about US$248.99 and a 30-day share price return that declined 12.67% alongside a 90-day share price return that fell 14.13%. At the same time, the 1-year total shareholder return sits at 8.74% and the 5-year total shareholder return is 124.07%. As a result, recent product news arrives against a backdrop of softer momentum on top of strong longer term gains.

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With Cboe Global Markets now trading around US$248.99 after a recent pullback but still showing strong multi year total returns, is the current valuation leaving clear upside on the table, or are markets already pricing in future growth?

Most Popular Narrative: 3% Overvalued

The most followed narrative currently pegs Cboe Global Markets at a fair value of about $241.95, which sits slightly below the last close of $248.99 and points to a small premium.

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Curious what growth, margins and discount rate assumptions sit behind that fair value for Cboe Global Markets? The narrative leans on a detailed cash flow path and a specific required return, all working together to justify that $241.95 figure.

Result: Fair Value of $241.95 (OVERVALUED)

However, this Cboe Global Markets narrative could be knocked off course if trading volumes soften or if regulators tighten rules around derivatives and prediction markets.

Another View on Cboe Global Markets Valuation

While the popular narrative frames Cboe Global Markets as about 3% overvalued at a fair value of US$241.95, the SWS DCF model presents a different perspective. It indicates that CBOE is trading above an estimated future cash flow value of US$138.91, which implies downside risk if those cash flows materialise as modeled.

For readers who want to see how the SWS DCF model works in detail and judge the assumptions for themselves, Look into how the SWS DCF model arrives at its fair value.

Next Steps

If this mix of cautious signals around Cboe Global Markets leaves you on the fence, now is a good time to review the details yourself and decide how compelling those potential rewards really are by checking the 4 key rewards.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.