| Securities exchanges are incredible businesses. Perhaps none more incredible than CME Group (Nasdaq: CME). CME Group is the world's leading derivatives marketplace. The company owns four major securities exchanges: - CME: Chicago Mercantile Exchange
- NYMEX: New York Mercantile Exchange
- CBOT: Chicago Board of Trade
- COMEX: Commodity Exchange.
Together, these four securities exchanges let CME Group churn out massive amounts of free cash flow. Free cash flow is the amount of money that a business generates after paying all expenses, including reinvesting in growth for the future. Free cash flow can be used to pay dividends, buy back shares, make acquisitions or improve the corporate balance sheet. Last year, on $5 billion in revenue, CME Group was able to generate almost $3 billion in free cash flow. That means CME Group had a free cash flow margin of almost 60%! That is just bonkers! For perspective, a free cash flow margin of 10% to 15% is generally considered very good. Even the megacap technology companies that dominate the S&P 500 today hit free cash flow margins of only about 20%. CME Group's free cash flow margin is so strong because the business requires very few people and very little equipment. Despite generating $5 billion in revenue last year, CME Group had only 3,460 employees. That means CME Group generated more than $1.4 million per employee. Clearly, CME Group has a lot going for it... but is the company worth investing in at current prices? | 
Post a Comment
Post a Comment