Share of the Month: CMC Markets (CMCX)
Summary
This month's featured share is CMC Markets (CMCX), identified through an AI-powered analysis of Regulatory News Service announcements after issuing a strong trading update, supported by solid underlying fundamentals. The company is increasingly being valued as a fintech rather than a traditional broker, with management forecasting significant growth in revenue and profitability driven by its expanding B2B platform. Based on the company's guidance, the forward P/E could fall to around 11x from a current trailing P/E of roughly 26x, suggesting the shares may still offer attractive value if those targets are achieved. However, the investment case depends heavily on management delivering its ambitious forecasts, as any disappointment could lead to a sharp fall in the share price.
Introduction
Welcome to the first ‘Share of the Month’ post where I aim to cover a single share in depth which has caught my eye and deserves a closer look. The website has only been up now for a couple of weeks and to add a human dimension I have decided to start a blog. For disclosure I will probably be investing real money of my own in these shares and while the majority of my investments are kept in long term trackers I find the markets fascinating.
Despite the site having AI in the name, this part of the site is not written by a bot. It’s human for a change. Much of the rest of the site is AI, it has been coded by AI, database curated by AI, website hosting maintained by AI and much of the concepts found in the website are ideas which were inspired by chatting to Claude (Anthropic) – this would be a whole team of people back in the day. The only downside to all this is that the site is very much like any other financial site as the AI just copies what is already out there. Not very original, but tried and tested and that makes for a good base on which to build. It was also very quick to spin up in just a couple of weeks and of course cheap to build (not maintain). The only thing left for me to do is the marketing – simple(not).
Identifying Share of the month CMCX
Extract from the website screener page showing fundamentals and derived calculated scores
The share this month was identified from the RNS (Regulatory News Service) not the screener, although it has very good fundamentals as you can see. The RNS news web page uses a filter and AI system to score the RNS. The total RNS news output is pretty noisy and full of useless announcements for investors, but in there are some nuggets and we aim to dig them out. I can write more about the actual system in future posts, also the parameters for the filter and AI context used to guide the LLM (Large Language Model) are still being tweaked.
One such share announcement which was identified by the AI filter this month was CMC Markets.
It had an AI score of 85 (0-100) and as you can see it was in the ‘Trading Update’ category . I have a new page on the website in development to take some of these high scoring news stories, further filter them using financials and then follow them in a watch list tracking environment. CMCX was the first one to be surfaced. Of course the website has only recently started RNS screening. Previous positive news has been also been driving the share price for CMC and this all helps build confidence.
CMC Markets
CMC Markets is arguably a fintech. It was started 36 years ago and builds tech for market trading both retail but mainly B2B. On July 1st Everton confirmed CMC Markets as the club's new main partner in a multi-year deal, taking front-of-shirt rights for the men's, women's and under-21 squads from the 2026/27 season, taking over from betting firm Stake. It has mutated over the years from brokerage, to today, which is more fintech (hence one of the reasons for its sudden increase in value). The fintech model is obviously to build and invest in tech infrastructure up front and then each additional customer consumes minimal capital costs when on-boarding (flick a switch). So the fintech label is important for driving valuation multiples. By convincing the market that it has a robust non cyclical customer base, specifically B2B, and that it can create recurring revenue from customers it can get this re rating.
The trailing P/E on many web sites is out of date, Google Finance puts the P/E@ 25, but the picture has quickly changed with uprated forecasts and a share price to reflect that change.
The shares have tripled from the £2.03, 52-week low, to the current price of approx. £7.00.
So we can calculate the trailing P/E at todays price.
Price / Earnings Per Share(EPS) = £7.00/ (£74.36 M/ 279.82M)
So the out of date trailing P/E = 26.3 (very close to the Google figure)
We can then calculate the new forward P/E under the assumption the board delivers on their claimed increased performance. From the above RNS trading statement CMC claim they will achieve increase of NOI (Net Operating Income) to £550M and an EBITDA of £250M. That’s a substantial increase over last years NOI of £392.6M (40%) and EBITDA of £117.8M (110%).
If we take the forward guidance EBITDA value of £250M. Remove the tax and depreciation at the same ratio as last year.
Earnings = £175m (deduct depreciation (~£17m) to get profit before tax, then tax at ~25%)
EPS = 175M/279.82m ≈ 62.5p
Forward P/E at 700p ≈ 700 ÷ 62.5 ≈ 11.2x
Not bad if they can deliver, but that’s pretty aggressive. Lets look at different scenarios.
Sensitivity table (price 700p throughout):
| Scenario | NOI* | EBITDA | ~EPS | Fwd P/E |
|---|---|---|---|---|
| Miss — old June guidance midpoint | £470m | ~£155m | ~37p | ~19x |
| Guidance floor delivered | £550m | £250m | ~62p | ~11x |
| Modest beat | £580m | ~£278m | ~70p | ~10x |
* NOI = Net Operating Income
These are my figures not those given in the trading statement
So that’s looking good, even on the miss scenario, the current price implies we would be paying ~19x. The whole premise relies on their costs remaining flat and a big increase in revenue. Note the price wouldn't stand still in a miss.
So the question is do you jump in now and pay what I think could be reasonable value or do you wait for market pull back. Fintech is not currently in vogue and is being caught up in the AI wobble. If CMC reverts to being priced as a broker then we are looking at P/E of 8-10.
From the statement.
‘Our B2B platform business is well positioned to scale with several important milestones expected over the next 12 months and a continuous pipeline of new B2B opportunities.’
Obviously if these milestones miss over the short term then the market will heavily punish CMC.
I will continue to track this share on the web site (new page coming soon) and we will see if the board can deliver their promises. I may even purchase a few myself.
Selfside link for more in depth analysis
Disclaimer
This is for information /educational purposes only and does not constitute financial advice for investment.