CME Group (NASDAQ: CME) and Nasdaq (NASDAQ:NDAQ) are both large-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, valuation, analyst recommendations, risk, profitabiliy, institutional ownership and earnings.

Insider and Institutional Ownership

83.1% of CME Group shares are owned by institutional investors. Comparatively, 75.5% of Nasdaq shares are owned by institutional investors. 0.6% of CME Group shares are owned by company insiders. Comparatively, 1.6% of Nasdaq shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Dividends

CME Group pays an annual dividend of $2.64 per share and has a dividend yield of 2.2%. Nasdaq pays an annual dividend of $1.52 per share and has a dividend yield of 2.1%. CME Group pays out 57.1% of its earnings in the form of a dividend. Nasdaq pays out 183.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. CME Group is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares CME Group and Nasdaq’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
CME Group 43.62% 7.43% 2.24%
Nasdaq 3.87% 11.77% 4.47%

Earnings & Valuation

This table compares CME Group and Nasdaq’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
CME Group $3.59 billion 11.45 $2.45 billion $4.62 26.19
Nasdaq $3.77 billion 3.19 $1.19 billion $0.83 87.64

CME Group has higher revenue, but lower earnings than Nasdaq. CME Group is trading at a lower price-to-earnings ratio than Nasdaq, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of recent recommendations and price targets for CME Group and Nasdaq, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
CME Group 0 3 4 0 2.57
Nasdaq 0 6 3 0 2.33

CME Group currently has a consensus price target of $126.71, indicating a potential upside of 4.72%. Nasdaq has a consensus price target of $73.11, indicating a potential upside of 0.51%. Given CME Group’s stronger consensus rating and higher possible upside, analysts clearly believe CME Group is more favorable than Nasdaq.

Volatility & Risk

CME Group has a beta of 0.74, suggesting that its stock price is 26% less volatile than the S&P 500. Comparatively, Nasdaq has a beta of 0.75, suggesting that its stock price is 25% less volatile than the S&P 500.

Summary

CME Group beats Nasdaq on 11 of the 16 factors compared between the two stocks.

About CME Group

CME Group Inc., through its exchanges, provides products across all asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural products and metals. The Company’s segment primarily consists of the Chicago Mercantile Exchange Inc. (CME), Board of Trade of the City of Chicago, Inc. (CBOT), New York Mercantile Exchange, Inc. (NYMEX) and Commodity Exchange, Inc. (COMEX) exchanges. The Company provides electronic trading around the globe on its CME Globex platform. The Company also offers clearing and settlement services across asset classes for exchange-traded and over-the-counter derivatives through its clearinghouses CME Clearing and CME Clearing Europe. It also provides hosting, connectivity and customer support for electronic trading through its co-location services. The Company’s CME Direct platform offers side-by-side trading of exchange-listed and privately negotiated markets.

About Nasdaq

Nasdaq, Inc. (Nasdaq) is a holding company. The Company is a provider of trading, clearing, exchange technology, regulatory, securities listing, information and public company services. It manages, operates and provides its products and services through four segments: Market Services, Corporate Services, Information Services and Market Technology. Its global offerings include trading and clearing across various asset classes, trade management services, data products, financial indexes, capital formation solutions, corporate solutions, and market technology products and services. Its technology markets across the globe, supporting equity derivative trading, clearing and settlement, cash equity trading, fixed income trading and various other functions. Its Market Services segment include its equity derivative trading and clearing, cash equity trading, fixed income clearing corporation and trade management services businesses. Its Corporate Solutions business serves corporate clients.

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