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What’s Interactive Brokers Group’s Valuation?

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Apr. 10 2018, Updated 10:31 a.m. ET

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Interactive Brokers Group’s (IBKR) price-to-earnings ratio on an NTM (next-12-month) basis stood at 30.59x. The company has higher valuations than the peer average of 11.39x. JPMorgan Chase (JPM), Morgan Stanley (MS), and Goldman Sachs (GS) have price-to-earnings ratios on an NTM basis of 11.82x, 11.25x, and 11.11x, respectively.

In March 2018, Interactive Brokers witnessed an increase in daily average revenue trades (or DARTs) YoY, which could be the primary reason for the higher valuations. Moreover, the volatility in the first three months of 2018 could lead to a rise in trading activity, which could favorably impact the company’s revenues. Thus, strong 1Q18 results could further improve its valuations.

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The rise in EPS estimates

Wall Street analysts have increased their 1Q18 earnings per share (or EPS) estimates for Interactive Brokers Group. A few days ago, the EPS estimate was $0.52, while the current estimate is $0.55. The expected increase in the company’s commission revenues could be the main reason for increasing EPS estimates. A rise in the customer margin loans could also help Interactive Brokers in garnering interest income. Thus, the company is expected to report strong 1Q18 results.

Interactive Brokers Group’s price-to-earnings ratio on an LTM (last-12-month) basis stood at 19.04x, while JPMorgan Chase (JPM), Morgan Stanley (MS), and Goldman Sachs (GS), other players (XLF) in the industry, had ratios of 15.90x, 14.74x, and 12.55x, respectively, on an LTM basis.

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