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A Look at Interactive Brokers Group’s Premium Valuations


Jul. 16 2018, Updated 9:02 a.m. ET

Price-to-earnings ratio

Investors have given premium valuations to brokers over the past couple of years due to rising interest in equities from all sectors, including institutional and retail as well as the United States and global equities.

The PE ratio of Interactive Brokers Group (IBKR) is 26.17x on an NTM (next-12-month) basis. That’s a premium valuation compared to its competitors’ average of 16.41x. On an NTM basis, Interactive Brokers Group’s competitors have the following PE ratios:

  • Charles Schwab (SCHW): 18.94x
  • TD Ameritrade Holding (AMTD): 14.56x
  • E*TRADE Financial (ETFC): 15.75x

Interactive Brokers Group is expected to see a favorable momentum moving forward, primarily due to expected volatility in equities as a result of trade war tensions. The company’s interest income could see a favorable impact if the Fed announces two more rate hikes in the second half of 2018.

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Industry’s expected performance

Customer margin loans also help Interactive Brokers Group gain interest income. When the markets witness a correction, the securities that are being used as collateral for margin loans may also see a downtrend. So if the company decides to offer fewer margin loans, it might see a fall in its interest income.

Moving forward, if the Federal Reserve raises interest rates at a slower pace, equities might see more inflows, which could help brokers. On an LTM (last-12-month) basis, Interactive Brokers Group has a PE ratio of 16.06x. Its peers (VFH) have the following PE ratios:

  • Charles Schwab (SCHW): 27.97x
  • TD Ameritrade Holding (AMTD): 32.83x
  • E*TRADE Financial (ETFC): 22.08x

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