Interactive Brokers Group Inc (IBKR, Financial) recently experienced a daily loss of -2.43%, contributing to a 3-month decline of -14.38%. Despite these fluctuations, the company maintains an Earnings Per Share (EPS) of $5.49. Investors are often left pondering the true value of a stock beyond its current market price. Is Interactive Brokers Group modestly undervalued as suggested by its current trading metrics? This valuation analysis aims to answer that question and provide a clearer picture of the company's financial standing.
Interactive Brokers Group Inc (IBKR, Financial) operates a robust online brokerage platform, generating significant revenue through trading commissions, net interest income, and ancillary services. The company's market presence is substantial, with approximately 70% of net revenue derived from the U.S. and the remaining 30% from international markets. Given its current stock price of $79.63 and a Fair Value (GF Value) of $112.62, there appears to be a notable discrepancy, signaling potential undervaluation. This introduction sets the stage for a deeper dive into the financial nuances of Interactive Brokers Group.
Understanding GF Value
The GF Value is a unique metric that represents the intrinsic value of a stock, incorporating historical trading multiples, a GuruFocus adjustment factor, and future business performance projections. The GF Value Line is a visual guide to the stock's fair trading value. Interactive Brokers Group's stock is currently considered modestly undervalued when compared to the GF Value, indicating the potential for higher future returns relative to its business growth.
Financial Strength Analysis
Investing in companies with robust financial strength is crucial to avoid potential capital loss. Interactive Brokers Group's cash-to-debt ratio of 0.36 places it below many of its industry peers. Consequently, GuruFocus ranks its financial strength as 4 out of 10, indicating a need for caution when assessing the company's balance sheet.
Profitability and Growth Prospects
Profitable companies, especially those with consistent historical performance, are generally considered safer investments. Interactive Brokers Group boasts a remarkable operating margin of 82.98%, reflecting strong profitability. Additionally, the company's average annual revenue growth rate of 7.2% showcases its ability to create value for shareholders, although its growth is outpaced by some competitors.
ROIC vs. WACC: A Profitability Indicator
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) can reveal its value creation efficiency. Interactive Brokers Group's ROIC of 29 exceeds its WACC of 19.83, indicating that the company is generating cash flow effectively and creating shareholder value.
Conclusion
Considering the modest undervaluation of Interactive Brokers Group's stock, the company's financial condition presents some concerns, yet its profitability remains robust. Its growth, while positive, is not leading the Capital Markets industry. For a detailed exploration of Interactive Brokers Group's financials, interested investors can review its 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.
