CME Group (NASDAQ: CME) and Intercontinental Exchange (NYSE:ICE) are both large-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their dividends, earnings, institutional ownership, analyst recommendations, risk, valuation and profitability.

Profitability

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

Net Margins Return on Equity Return on Assets
CME Group 40.94% 7.89% 2.16%
Intercontinental Exchange 27.91% 11.01% 2.18%

Dividends

CME Group pays an annual dividend of $2.64 per share and has a dividend yield of 1.7%. Intercontinental Exchange pays an annual dividend of $0.80 per share and has a dividend yield of 1.1%. CME Group pays out 59.9% of its earnings in the form of a dividend. Intercontinental Exchange pays out 29.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. CME Group has raised its dividend for 3 consecutive years. CME Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of recent ratings and recommmendations for CME Group and Intercontinental Exchange, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
CME Group 0 3 6 0 2.67
Intercontinental Exchange 0 2 6 0 2.75

CME Group currently has a consensus price target of $142.71, indicating a potential downside of 6.55%. Intercontinental Exchange has a consensus price target of $72.38, indicating a potential upside of 2.21%. Given Intercontinental Exchange’s stronger consensus rating and higher possible upside, analysts clearly believe Intercontinental Exchange is more favorable than CME Group.

Institutional and Insider Ownership

83.2% of CME Group shares are held by institutional investors. Comparatively, 90.8% of Intercontinental Exchange shares are held by institutional investors. 0.6% of CME Group shares are held by company insiders. Comparatively, 1.5% of Intercontinental Exchange shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Risk & Volatility

CME Group has a beta of 0.73, indicating that its share price is 27% less volatile than the S&P 500. Comparatively, Intercontinental Exchange has a beta of 0.7, indicating that its share price is 30% less volatile than the S&P 500.

Valuation & Earnings

This table compares CME Group and Intercontinental Exchange’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
CME Group $3.60 billion 14.40 $1.53 billion $4.41 34.63
Intercontinental Exchange $5.96 billion 6.95 $1.42 billion $2.75 25.75

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

CME Group Company Profile

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.

Intercontinental Exchange Company Profile

Intercontinental Exchange Inc, formerly IntercontinentalExchange Group, Inc., is a network of regulated exchanges and clearing houses for financial and commodity markets. The Company delivers transparent and accessible data, technology and risk management services to markets around the world through its portfolio of exchanges, including the New York Stock Exchange, ICE Futures, Liffe and Euronext. In February 2014, the Company completed the acquisition of Singapore Mercantile Exchange. In July 2014, Intercontinental Exchange Inc sold its Wombat Financial Software, a unit of NYSE Technologies. Effective September 10, 2014, Intercontinental Exchange Inc acquired an undisclosed majority interest in Holland Clearing House NV.

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