With a recent daily loss of 5.49% and a three-month decline of 18.04%, investors might be questioning the current valuation of Interactive Brokers Group Inc (IBKR, Financial). The Earnings Per Share (EPS) stands at 5.49, prompting an analysis to determine if the stock is indeed modestly undervalued as suggested by GuruFocus' valuation metrics. This exploration aims to provide an answer, inviting readers to delve into the following in-depth valuation analysis.
Company Overview
Interactive Brokers Group, with a market capitalization of $7.80 billion and sales of $7.20 billion, operates as a sophisticated online brokerage firm. It generates significant revenue from diverse trading commissions and net interest income, with a substantial portion of net revenue derived from the U.S. market. The company's robust operating margin of 82.98% and a Return on Invested Capital (ROIC) of 29 underline its financial prowess. When juxtaposed with the GF Value of $106.03, Interactive Brokers Group's current stock price of $76.41 suggests that the stock may be trading at a discount to its intrinsic value.
Understanding GF Value
The GF Value is a unique measure of a stock's fair value, taking into account historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. Interactive Brokers Group's stock appears modestly undervalued, as the current share price is below the GF Value Line, indicating potential for higher future returns relative to its business growth.
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Financial Strength Analysis
When assessing the financial strength of a company, metrics such as the cash-to-debt ratio are crucial. Interactive Brokers Group's cash-to-debt ratio of 0.36 ranks lower than many of its industry peers, leading to a financial strength rating of 4 out of 10 by GuruFocus. This suggests that the company's balance sheet could be stronger. The historical debt and cash flow data for Interactive Brokers Group will provide further insight into its financial stability.
Profitability and Growth Prospects
Profitable companies with consistent performance are generally safer investments. Interactive Brokers Group has maintained profitability over the past decade, with an impressive operating margin that outperforms the majority of its industry counterparts. The company's growth rates, however, show a mixed performance when compared to industry averages, indicating areas where there may be room for improvement.
ROIC vs. WACC
A critical aspect of profitability is the comparison between a company's Return on Invested Capital (ROIC) and its Weighted Average Cost of Capital (WACC). Interactive Brokers Group's ROIC is significantly higher than its WACC, suggesting efficient cash flow generation relative to the capital invested. This comparison is a positive indicator of the company's profitability.
Final Thoughts on Interactive Brokers Group's Valuation
In conclusion, Interactive Brokers Group's stock seems modestly undervalued, offering a potentially attractive investment opportunity. Despite some concerns over financial strength, the company's robust profitability and favorable ROIC versus WACC comparison paint a promising picture. For a more detailed financial overview of Interactive Brokers Group, interested investors can review the company's 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
