Cboe Global Markets, Inc. (CBOE) stock intrinsic value fair value estimate & owner earnings analysis

Cboe Global Markets runs securities exchanges. Its most valuable asset is its franchise in index options: SPX options on the S&P 500 and options and futures on its own VIX volatility index. In 2025 Cboe earned $2,429.1 million of revenue after pass-through costs (liquidity rebates, routing and clearing fees, regulatory fees). Derivatives markets supplied $1,341.0 million (55%), the Data Vantage market-data and access business $622.9 million (26%), and cash and spot markets (equities, FX and clearing) $465.2 million (19%). The company says about 68% of that revenue came from its options and futures segments, mostly SPX and VIX products. About 87% ($2,119.3 million) was booked in the United States. The remaining $309.8 million came from its businesses outside the United States, in Europe, Canada, Australia and Japan. How we measured earnings. We use owner earnings: operating cash flow less stock compensation, less the capital spending needed to maintain the business, with working-capital swings removed. This matters a great deal at Cboe. Its clearing operations hold margin deposits and clearing funds posted by members, and changes in those balances pass through reported operating cash flow. In 2020 they added $812 million and in 2025 about $529 million. That money belongs to customers, so we strip it out, along with the timing of regulatory fees Cboe collects and passes on to the SEC. We also count tax reserves the company has booked but not yet paid (including reserves related to the Section 199 tax deduction) as if they had been paid. We add back non-cash write-downs: $460.9 million of goodwill written off in 2022, the year Cboe bought its digital-asset trading business (Cboe Digital), plus further asset write-downs of $81.0 million in 2024 and $46.7 million in 2025. Cash Cboe received in 2025 from its equity-method and minority investments ($441.8 million) is left out because we treat it as non-recurring. On this basis, owner earnings per share were $4.97 in 2018, $4.69 in 2019, $5.04 in 2020, $5.98 in 2021, $6.13 in 2022, $7.72 in 2023, $8.59 in 2024 and $10.62 in 2025 ($1,115.6 million). Diluted shares fell from 112.2 million to 105.1 million over that time. Starting point. Trading volumes swing from year to year: owner earnings per share fell in 2019, and in 2025 they jumped 24% on higher options volumes. Rather than build on 2025 alone, we start from $8.59 per share, the median of 2023 to 2025. That period covers two years of steady growth and one strong year at the company's current size. Our base case assumes 20% growth in the first year from the $8.59 starting point, to $10.31. That is below both the 24% growth of 2025 and the $10.62 actually earned in 2025, but the first half of 2026 supports it: revenue after pass-through costs rose 26.7% to $1,460.5 million and operating income rose 41.6% to $981.6 million, and the increase came from operations. The key date. Cboe's license from S&P runs through December 31, 2033, and its exclusive right to list S&P 500 index options runs through December 31, 2032. That license has been in place, and repeatedly amended, since 1994. The VIX methodology belongs to Cboe. Base case ($281 per share). Earnings reach $10.31 in year one and grow 9% a year for four years. Cboe's record supports this: revenue after pass-through costs grew from $1,136.9 million in 2019 to $2,429.1 million in 2025, and the share count shrinks steadily. Growth slows to 7% and then 5% around the 2032 license date, on the assumption that the S&P license is renewed on similar terms. Earnings reach about $18.92 in year ten and then stay flat, with no further growth. What keeps them there is the SPX and VIX liquidity pool and the data business built on it, a franchise that has lasted for decades. About $105 of the value comes from the first ten years and $176 from later years, so the case depends on that franchise lasting. Bear case ($129 per share). A slow trading year like 2019, when owner earnings per share fell about 6%, drops first-year earnings 5% to $8.16. Growth then slows to 4% a year. The SEC's lower cap on equity exchange access fees (to be implemented in November 2026) and competition in multi-listed options and cash equities hold growth back, and Cboe's record of buying businesses (about $1.2 billion spent in 2020 to 2022, including the $460.9 million of goodwill written off in 2022) suggests some capital will be wasted. S&P exclusivity then ends after 2032. SPX options become listable on rival exchanges, and fee pressure cuts owner earnings about 28% over two years, to about $7.17 per share. From there earnings hold flat, supported by VIX, data and Cboe's exchanges. Debt is not a bear-case problem. At the end of 2025 Cboe had $1,442.9 million of debt in senior notes due in 2027, 2030 and 2032, against $2,216.5 million of cash. Bull case ($476 per share). The strength of the first half of 2026 holds for a full year, lifting earnings 35% from the starting point to $11.60. Growth then runs at 11% a year through year five, in line with the 2018 to 2025 record, and 9% through year ten, with the S&P license renewed. Over the next decade growth continues at 4% a year from index-options volume and buybacks before levelling off at about $40 per share. What would make this wrong: losing S&P 500 exclusivity on worse terms than the bear case assumes; a long stretch of very low volatility; or a new, costly acquisition. The filings do not say how much of the index-options business depends on exclusivity rather than liquidity, so the size of the 2033 effect is our judgement. The 2025 strategic review also led Cboe to put its Australian and Canadian businesses up for sale, wind down its Japanese equities business and exit corporate listings, and the derivatives exchange in Europe (CEDX) is now being wound down as well. These are small, and we have not given them any separate value. Weighing the three cases, the margin-of-safety price is $165 a share, about 41% under the base case, because so much of the value depends on the S&P franchise continuing after 2032.