Is It Too Late To Consider Interactive Brokers Group (IBKR) After A 67% One Year Surge?

• Wondering whether Interactive Brokers Group is still fairly priced after its strong run, or if the current share price offers value that the market is missing.
• The stock recently closed at US$71.21, with returns of 5.1% over 7 days, 7.6% over 30 days, 5.9% year to date and 67.1% over the past year, plus very large gains over 3 and 5 years.
• Recent attention around Interactive Brokers Group has focused on its role as a major online brokerage platform and on the broader interest in trading and investing services. This context helps explain why investors are reassessing what they are willing to pay for each dollar of the company’s earnings and cash flows.
• Even so, Simply Wall St currently gives the stock a valuation score of 1 out of 6. The rest of this article will walk through the main valuation methods behind that result, and then finish with a way to see valuation in a more complete, forward looking framework.

Interactive Brokers Group scores just 1/6 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 value a company creates above the return that shareholders require. It takes the equity investors put in, estimates a sustainable return on that equity, subtracts the required cost of equity, and then adds up those “excess” profits to arrive at an intrinsic value per share.

For Interactive Brokers Group, the model uses a Book Value of US$12.04 per share and a Stable EPS estimate 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%, while the Cost of Equity is US$0.74 per share. That results in an estimated Excess Return of US$1.12 per share. The Stable Book Value input is US$9.05 per share, drawn from the median book value over the past 5 years.

Using these inputs in the Excess Returns framework gives an intrinsic value of about US$32.67 per share. Compared with the recent price of US$71.21, the model output indicates that the stock is trading at a substantial premium, with an implied difference of roughly 118.0%.

Result: OVERVALUED

Our Excess Returns analysis suggests Interactive Brokers Group may be overvalued by 118.0%. Discover 58 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

P/E is a common way to value profitable companies because it links what you pay directly to the earnings each share generates. In general, higher growth expectations or lower perceived risk can justify a higher P/E ratio, while slower growth or higher risk usually point to a lower, more conservative multiple.

Interactive Brokers Group currently trades on a P/E of 32.25x. That sits below the Capital Markets industry average of 39.09x, but above the peer group average of 21.77x. This means the stock is priced higher than many peers while still below the wider industry level. Simply Wall St also calculates a Fair Ratio of 18.96x, which reflects what investors might typically pay for the company after considering factors such as its earnings growth profile, profit margins, industry, market cap and specific risks.

This Fair Ratio is more tailored than a simple comparison with peers or the industry, because it blends these company specific drivers into a single reference multiple. Comparing the Fair Ratio of 18.96x with the current P/E of 32.25x suggests the shares trade at a richer level than that customised benchmark.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Interactive Brokers Group Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives offer that by letting you attach a clear story about Interactive Brokers Group to your own assumptions for future revenue, earnings and margins on Simply Wall St's Community page. You can then link that story to a forecast and a Fair Value that you can compare with the current price, have it update automatically when new news or earnings arrive, and see it side by side with other investors' views, such as a more cautious Fair Value closer to US$58.09 or a more optimistic view near US$85.00, so you can decide how your outlook lines up with the current market price.

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

🐂 Interactive Brokers Group Bull Case

Fair value in this bullish narrative: US$80.44 per share

Implied discount to that fair value relative to the recent US$71.21 price: about 11.5% undervalued

Analyst revenue growth assumption used in this story: 12.43% a year

• Emphasis on new products, international expansion and partnerships that could support higher trading activity, commissions and a broader client base.
• Focus on record client credit balances and strong new account additions as a sign of platform trust and capacity for higher earnings over time.
• Highlights risks around market conditions, competition, expansion execution and interest rate changes that could challenge those optimistic assumptions.

🐻 Interactive Brokers Group Bear Case

Fair value in this more cautious narrative: US$15.08 per share

Implied premium to that fair value relative to the recent US$71.21 price: very large overvaluation

Revenue growth assumption used in this story: 6.28% a year

• Points to very high profitability today, with strong net revenues, margins and the benefits from trading volumes and interest income on client balances.
• Flags that a large share of profits is tied to interest income and trading activity, which could come under pressure if rates fall or volumes slow.
• Notes competitive threats from low cost brokers, retail trading apps and emerging crypto and tokenization platforms that could reshape how clients access markets.

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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