CMC Markets (CMCX.L): a 245% rally is pricing a single-year EBITDA doubling that the cash flow statement has not yet validated
CMC Markets traded at 203p on 10 November 2025. As of the valuation date it sits at 700p, an all-time high, after a 56% one-week surge triggered by a guidance upgrade on 1 July. What was a cyclical retail CFD and spread-betting broker is now being priced as a B2B platform company. The operating-leverage step-change that price assumes is guided, not yet delivered, and the audited cash flow is pointing the other way.
**Headline numbers** (FY26, year ended 31 March 2026)
- Trailing P/E: 26.3x, the highest in the company's listed history; roughly 12x forward on FY27 guidance
- Forward EV/EBITDA: 6.7x on £250m FY27 EBITDA guidance; trailing 13.4x
- Operating margin: 27.0%, up from 18.2% in FY24
- Net cash: £163.8m, which includes a €300m commercial paper programme draw
- Operating cash flow / net income: 0.66x, the worst in seven years, on a £192m receivables build
- Dividend yield: 1.9% (13.8p DPS, 50% payout, 1.23x FCF cover)
**The guidance that moved the stock**
The FY26 preliminary results on 4 June guided FY27 net operating income to £460-480m with operating expenses of roughly £280m. Twenty-seven days later, the 1 July trading update raised that to "at least £550 million" with £250m of EBITDA. The arithmetic implies about £270m of operating profit before variable remuneration, which is 2.4x FY26's £111.1m operating income, and the entire upgrade flows through to EBITDA because the cost base is held flat.
The engine is a Westpac partnership extension that will migrate A$39bn of assets and roughly 500,000 share-trading accounts onto CMC's platform over a 12-month window, on top of an Australian stockbroking business that grew NOI 32% to A$140.3m in FY26. The B2B turnaround is genuine: the Investing segment went from a £19.4m operating loss in FY24 to £18.1m of profit before tax in FY26. But that £18.1m is 18% of group PBT. For FY27 EBITDA to double as guided, Investing has to become the dominant profit driver in a single year, or the Trading segment needs another favourable client-outcome year. Neither outcome is audited.
**What the accounts flag**
Gross margin expanded from 59.6% to 87.0% in two years. In a CFD model that swing is dominated by client trading outcomes (when clients lose, CMC's cost of revenue falls), not by the B2B pivot or the 2024 cost reset, and it may not repeat.
Cash conversion collapsed to 0.66x. Net receivables jumped from £269.1m to £455.0m, which is 110.7% of annual revenue, and the composition of that balance is not disclosed in any RNS filing. The prior year showed the opposite extreme, 2.82x conversion on a £94.1m working-capital release, so neither year is a clean read on run-rate cash generation.
The balance sheet has also changed shape. A firm that carried near-zero leverage for a decade set up an up to €300m commercial paper programme in November 2025; short-term debt went from £3.1m to £95.2m and interest expense rose 5.3x to £10.1m against roughly £5.5m of treasury-related trading income, so the treasury operations were net value-destructive at the PBT level in year one. Meanwhile reported capex was just £3.3m, with Westpac integration costs being capitalised instead. The same mechanism produced a £12.3m platform write-off in FY24.
**Valuation against the peer set**
At the 2 July snapshot, CMCX carried the highest trailing P/E in its peer group (26.3x vs 13.4x for IG Group and 17.2x for Plus500) alongside the lowest ROE (16.3% vs 26.1% and 50.5%). If the FY27 guidance is delivered, the forward multiples compress below both peers' trailing levels. If it slips, this is the most expensive stock in the group with the worst cash conversion and the lowest returns. The stock also sits 67% above its 50-day moving average, so the position is mechanically fragile if the next print disappoints.
**Bottom line**
The note's view is that the risk-reward at 700p is balanced but binary. Roughly 12x forward earnings is undemanding for a business guiding to 100% EBITDA growth, while the trailing 26.3x has no cushion if that guidance slips. The H1 FY27 interims in November 2026 are the single data point that resolves it: an NOI print at or above £275m validates the operating-leverage thesis, and anything materially below exposes the premium.
**What to watch**
- H1 FY27 NOI (November 2026): below £260m signals the £550m full-year guidance is back-end loaded and unproven
- Westpac integration milestones before March 2027: any RNS disclosing slippage removes the largest B2B revenue engine from the FY27 bridge
- FY27 receivables-to-revenue: staying above 100% suggests the working-capital absorption is structural to the B2B model, not transitional
**Sources**
- FY26 Preliminary Results, 4 Jun 2026 (RNS)
- Trading Update, 1 Jul 2026 (RNS)
- Westpac Partnership Extension, 29 Sep 2025 (RNS)
- H1 FY26 Interim Results, 20 Nov 2025 (RNS)
- Selfside data: income statement, balance sheet, cash flow and peer snapshot, FY2020-FY2026
*For information purposes only, not investment advice - independent research, originally published in full at Selfside.*