Is It Too Late To Consider Buying Interactive Brokers Group (IBKR) After Strong Multi‑Year Gains

• If you are wondering whether Interactive Brokers Group is still good value after its recent run, this article walks through what the current price might be implying about the stock.
• The shares last closed at US$73.65, with returns of a 1.7% decline over 7 days, a 2.3% decline over 30 days, 9.5% year to date, 43.3% over 1 year and a very large 3 year and 5 year gain.
• Recent attention on Interactive Brokers Group has focused on its position as a global electronic brokerage platform and how it stacks up against competitors in terms of pricing, product breadth and technology. This helps explain why investors are closely watching the stock. Coverage has also highlighted its role as a diversified financials company listed on the Nasdaq exchange, which keeps the spotlight on how the market values its business model over time.
• Simply Wall St currently scores Interactive Brokers Group at 0 out of 6 on its valuation checks. We will look at what traditional metrics like P/E and cash flows suggest about fair value, then finish with a way to judge valuation that can give you a fuller picture than any single model on its own.

Interactive Brokers Group scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Interactive Brokers Group Excess Returns Analysis

The Excess Returns model looks at how much profit a company is expected to generate above the return that shareholders require, and then capitalizes those excess profits into an estimate of intrinsic value per share.

For Interactive Brokers Group, the model uses a Book Value of US$12.04 per share and a Stable EPS of US$1.86 per share, based on the median return on equity from the past 5 years. The Average Return on Equity is 20.52%, compared with a Cost of Equity of US$0.74 per share. This leads to an Excess Return of US$1.11 per share. The Stable Book Value used in the model is US$9.05 per share, taken from the median book value over the past 5 years.

Putting these inputs together, the Excess Returns model produces an estimated intrinsic value of US$32.10 per share. Relative to the recent share price of US$73.65, this calculation suggests the stock is 129.4% above the value indicated by this method.

Result: OVERVALUED on this model

Our Excess Returns analysis suggests Interactive Brokers Group may be overvalued by 129.4%. Discover 53 high quality undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Interactive Brokers Group.

Approach 2: Interactive Brokers Group Price vs Earnings

For a profitable company, the P/E ratio is a useful way to think about what you are paying for each dollar of earnings, which is why it is the preferred multiple here. A higher or lower P/E often reflects what the market is building in for future growth and how much risk investors feel they are taking on.

Interactive Brokers Group currently trades on a P/E of 33.33x. That sits above the Capital Markets industry average of 23.01x and a peer average of 22.98x. Simply Wall St also calculates a proprietary “Fair Ratio” of 21.91x for Interactive Brokers Group. This Fair Ratio is designed to reflect what a more tailored P/E might look like after considering factors such as earnings growth, the company’s industry, profit margins, market cap and specific risks.

Compared with a simple peer or industry comparison, the Fair Ratio aims to be more precise because it adjusts for the company’s own characteristics rather than assuming all firms deserve the same multiple. Set against the current P/E of 33.33x, the Fair Ratio of 21.91x indicates the shares are pricing in more than this framework suggests.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Interactive Brokers Group Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which are simple stories that you and other investors build around Interactive Brokers Group by linking your view of its business, your forecasts for revenue, earnings and margins, and the fair value you think those numbers support.

On Simply Wall St, these Narratives sit in the Community page and help you connect the company’s story to a financial model and then to a fair value, so you can compare that fair value to the current share price and decide whether the stock looks expensive or cheap according to your own assumptions rather than a single metric like the P/E ratio.

Narratives are updated automatically as new information, such as earnings results or news, is added to the platform, so your view stays current, and you can see how other investors differ. For example, one Interactive Brokers Group Narrative currently points to a fair value of about US$15.08, while another points to about US$85.00. This shows how the same company can support very different conclusions depending on the story and numbers you believe.

For Interactive Brokers Group, however, we will make it really easy for you with previews of two leading Interactive Brokers Group Narratives:

These sit at opposite ends of the valuation range and show how different assumptions can lead to very different fair values, even for the same stock price of US$73.65.

🐂 Interactive Brokers Group Bull Case

Fair value in this bullish narrative: US$80.67 per share

Implied discount to this fair value: about 8.7% below the narrative fair value, based on the last close of US$73.65

Revenue growth input used in the model: 11.05%

• The narrative centers on global product expansion, platform upgrades and partnerships as key drivers that could support higher trading activity, client balances and account growth over time.
• Analysts in this view are using revenue growth of 11.05%, a profit margin of about 14.94% and a future P/E of 38.30x, tied together with an 8.28% discount rate to arrive at a fair value of roughly US$80.67.
• This camp points to features like stablecoin funding, new market access and app improvements as factors that could support the business case behind their higher price targets, while still acknowledging execution and macro risks.

🐻 Interactive Brokers Group Bear Case

Fair value in this bearish narrative: US$15.08 per share

Implied premium to this fair value: very large, with the last close of US$73.65 far above the narrative fair value of US$15.08

Revenue growth input used in the model: 6.28%

• This narrative highlights that while recent quarters show very high profitability and strong trading and interest income, those results are tightly linked to active markets and current rate levels.
• The author focuses on competition from low cost brokers, retail apps and new tokenization platforms, as well as interest rate and volume sensitivity, as reasons to anchor fair value closer to US$15.08 with revenue growth of 6.28% and a future P/E of 34.32x.
• In this view, efficiency and global reach are strengths today, but the risk is that changes in market structure, lower rates or quieter trading could leave current pricing well ahead of what the model regards as sustainable value.

Seeing both narratives side by side gives you a clear sense of the range of outcomes investors are working with. You can use them as reference points, then put your own assumptions around growth, margins, interest rates and client activity to decide where you sit on that spectrum for Interactive Brokers Group.

Curious how numbers become stories that shape markets? Explore Community Narratives

Do you think there's more to the story for Interactive Brokers Group? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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