CBOE Holdings, Inc (CBOE): Growing Popularity and 24-Hour Trading on the Way

There are seven other U.S. options exchanges that CBOE competes with, including the household names NYSE Arca, which is in the process of being acquired by IntercontinentalExchange Inc (NYSE:ICE) and NASDAQ (NASDAQ:NDAQ)’s OMX PHLX.  However, I believe that CBOE simply offers investors much more growth opportunity that either of these exchanges.

Intercontinental Exchange trades at 18.8 times earnings, with similar earnings growth potential as CBOE.  Additionally, the company does not have a similar positive net cash position as CBOE.  ICE is a great company and a great investment; I just foresee much more growth in the options industry in the next few years.

NASDAQ, on the other hand, trades at just 14 times earnings, with 8.5% growth.  Not a bad valuation, however, the company has net debt of about $1.3 billion, which is a significant amount.  It is definitely not an unmanageable debt load, however I like investing in low-debt companies whenever possible.

To sum it up, CBOE already operates in a very dynamic and relatively new area of trading.  With the coming transition to round-the-clock options trading and an increased global presence, the sky is the limit.  More important than the earnings numbers themselves will be the company’s updates on their expansion plans and the outlook for volatility and trading volumes going forward.

The article Growing Popularity and 24-Hour Trading on the Way originally appeared on Fool.com and is written by Matthew Frankel.

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