Both IBKR and OXPS are major players in the once-again booming options markets, as well as in equities, futures and FOREX. As risk aversion declines their businesses are expected to see gains in both absolute account numbers and trading volumes.
Both companies sport clean balance sheets and solid profitability with substantially better results expected for 2010. Each stock is down dramatically from their bull market valuations and now trades at nice discounts to the better-known industry competitors Charles Schwab and TD Ameritrade based on P/E and P/BV.
I believe this translates to a great opportunity for investors seeking good-quality shares that have yet to reflect the improving market conditions. Compare the values available for IBKR and OXPS versus AMTD and SCHW based on current prices.
Using a very conservative assumption of just 16 times next year’s projections, leads me to the following target prices for these four stocks.
Here are the average multiples over the past few years for each of these companies since 2005. Based on today’s prices and next year’s projections IBKR and OXPS seem to offer much better upside and less risk than Schwab and Ameritrade.
Outright purchase of both IBKR and OXPS offers better than 30% upside over the next 12 months based simply on a regression to more normalized valuation metrics and a somewhat improving overall market.
Disclosure: Author is long IBKR and OXPS shares and short IBKR and OXPS options.
Both companies sport clean balance sheets and solid profitability with substantially better results expected for 2010. Each stock is down dramatically from their bull market valuations and now trades at nice discounts to the better-known industry competitors Charles Schwab and TD Ameritrade based on P/E and P/BV.
I believe this translates to a great opportunity for investors seeking good-quality shares that have yet to reflect the improving market conditions. Compare the values available for IBKR and OXPS versus AMTD and SCHW based on current prices.
Company | 11/9/09 Close | 2009 Est. | 2010 Est. | 2009 P/E | 2010 P/E | Price/ B/V |
IBKR | $17.14 | 1.10 | 1.47 | 15.6x | 11.7x | 1.2x |
OXPS | $15.85 | 1.06 | 1.29 | 15.0x | 12.3x | 2.9x |
AMTD* | $20.38 | 1.05 | 1.25 | 19.4x | 16.3x | 3.5x |
SCHW | $17.83 | 0.72 | 0.89 | 24.8x | 20.0x | 4.5x |
*AMTD reflect FYs ending Sep. 30 | ||||||
Using a very conservative assumption of just 16 times next year’s projections, leads me to the following target prices for these four stocks.
Company | 2007-2008 Peak Price | 2008-2009 Trough Price | % Drop from Peak | Est. Gains @16x 2010 EPS |
IBKR | $35.93 | $12.68 | (64.7%) | 37.2% |
OXPS | $34.95 | $8.38 | (76.0%) | 30.2% |
AMTD* | $23.50 | $9.30 | (60.4%) | (1.9%) |
SCHW | $28.80 | $11.00 | (61.8%) | (20.1%) |
Here are the average multiples over the past few years for each of these companies since 2005. Based on today’s prices and next year’s projections IBKR and OXPS seem to offer much better upside and less risk than Schwab and Ameritrade.
Company | Average P/E | Est. 2010 P/E | Discount to Avg. |
IBKR* | 16.8x | 11.7x | 30.4% |
OXPS | 18.1x | 12.3x | 32.0% |
AMTD | 17.1x | 16.3x | 4.7% |
SCHW | 21.7x | 20.0x | 7.8% |
Outright purchase of both IBKR and OXPS offers better than 30% upside over the next 12 months based simply on a regression to more normalized valuation metrics and a somewhat improving overall market.
Disclosure: Author is long IBKR and OXPS shares and short IBKR and OXPS options.
