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A Look At Interactive Brokers Group Inc (NASDAQ:IBKR) And The Financial Sector

Interactive Brokers Group Inc (NASDAQ:IBKR), a US$27.92B large-cap, operates in the capital markets industry, which now face the choice of either being disintermediated or proactively disrupting their own business models to thrive in the future. Financial services analysts are forecasting for the entire industry, a positive double-digit growth of 13.19% in the upcoming year , and a robust short-term growth of 11.65% over the next couple of years. However, this rate came in below the growth rate of the US stock market as a whole. Below, I will examine the sector growth prospects, as well as evaluate whether Interactive Brokers Group is lagging or leading in the industry. View our latest analysis for Interactive Brokers Group

What’s the catalyst for Interactive Brokers Group’s sector growth?

NasdaqGS:IBKR Past Future Earnings Mar 6th 18
NasdaqGS:IBKR Past Future Earnings Mar 6th 18

The threat of disintermediation in the capital markets industry is both real and imminent, taking profits away from traditional incumbent financial institutions. In the past year, the industry delivered growth in the teens, beating the US market growth of 10.79%. Interactive Brokers Group lags the pack with its negative growth rate of -14.59% over the past year, which indicates the company will be growing at a slower pace than its capital markets peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 86.78% in the upcoming year.

Is Interactive Brokers Group and the sector relatively cheap?

NasdaqGS:IBKR PE PEG Gauge Mar 6th 18
NasdaqGS:IBKR PE PEG Gauge Mar 6th 18

The capital markets sector’s PE is currently hovering around 16.54x, relatively similar to the rest of the US stock market PE of 18.6x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a higher 12.87% compared to the market’s 10.43%, potentially illustrative of past tailwinds. On the stock-level, Interactive Brokers Group is trading at a higher PE ratio of 63.95x, making it more expensive than the average capital markets stock. In terms of returns, Interactive Brokers Group generated 12.33% in the past year, in-line with its industry average.

Next Steps:

Interactive Brokers Group’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this higher growth prospect is also reflected in the company’s price, suggested by its higher PE ratio relative to its peers. If Interactive Brokers Group has been on your watchlist for a while, now may not be the best time to enter into the stock since it is trading at a higher valuation compared to other capital markets companies. However, before you make a decision on the stock, I suggest you look at Interactive Brokers Group’s fundamentals in order to build a holistic investment thesis.

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.

  2. Historical Track Record: What has IBKR’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Interactive Brokers Group? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.

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