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How Interactive Brokers Group Is Valued after Q2 Results

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Jul. 25 2018, Updated 11:05 a.m. ET

IBKR’s premium valuations

Interactive Brokers Group’s (IBKR) price-to-earnings ratio is 27.36x on an NTM (next-12-month) basis, which is a premium compared to the peer average of 17.36x. The primary reason for its premium valuation is its strong second-quarter results. The company’s average interest-earning assets amounted to $57.8 billion in the second quarter, implying YoY growth of 9.2%. In addition, its net interest margin expanded to 1.61% in the second quarter from 1.17% in the same quarter a year ago. Interactive Brokers Group’s net interest margin has been increasing over the past few quarters and is expected to increase moving forward mainly because of the Fed’s hawkish monetary views.

On an NTM basis, Interactive Brokers Group’s competitors (VFH) have the following PE ratios:

  • E*TRADE Financial (ETFC): 16.29x
  • TD Ameritrade Holding (AMTD): 15.62x
  • Charles Schwab (SCHW): 20.18x
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Impact of trade battle moving forward

The ongoing trade tensions between the US and China could impact Interactive Brokers Group. Around 16% of the company’s total accounts are in China, and escalation in the battle might lead to subdued growth in the company’s accounts moving forward.

Interactive Brokers has been upgrading its platform in order to attract customers. The company is investing to improve its trading platform, as customers can now trade multiple products via one account, and Interactive Brokers plans to introduce payroll direct deposits.

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