INTERACTIVE BROKERS GROUP, INC. (IBKR): what the price requires
At today's price, INTERACTIVE BROKERS GROUP, INC. (IBKR) is priced for today's economics sustained for ~7.5 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/IBKR
Headline
| Field | Value |
|---|---|
| Ticker | IBKR |
| Company | INTERACTIVE BROKERS GROUP, INC. |
| Current price | $93.20/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | fee-financial |
| Price-to-earnings | 42.5x |
| Earnings yield | 2.4% |
The GAAP earnings base is materially attributable to non-controlling interests; the implied growth and duration are suppressed as distorted. The multiple is the honest statement.
A hybrid: a fee franchise alongside a sizeable balance sheet, valued here on the fee annuity.
Solve inputs: computed at a 10.2% cost of equity; growth searched up to the 20% fee-earnings ceiling; each 1pp moves the implied horizon ~1.7 years.
How unusual the bet is: high
| Reference | Value |
|---|---|
| vs own history | +0.17σ |
| cohort percentile (of 49 peers) | 96 |
| sustained it ~7.5 years at this level | 21% |
Valuation X-Ray
The price is supported by asset-based and growth-DCF value, while earnings-power lands below the price. A value/asset-supported name, not a pure growth bet.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 0.68x | 4 | justifies |
| Earnings | 5.26x | 2 | expensive |
| Relative | 1.40x | 2 | expensive |
| Growth | 0.91x | 1 | justifies |
Families that justify the price: Asset, Growth Families that call it expensive: Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 5.8%); the inversion above states its own rate.
Per-Model Detail (n=9)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | — | — | no | — |
| DCF Exit Multiple | Growth | $0.00 | — | no | Negative/zero FCF or EBITDA — equity value floored at $0 |
| Relative Valuation | Relative | $145.68 | 0.64x | yes | P/E 12x (static sector reference · 2026-04), scenarios: 9.8x / 12.0x / 14.2x (bear / base = reference held flat / bull), EV/EBITDA N/Ax |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $110.04 | 0.85x | yes | BV/sh $12.46, ROE (TTM) 81.7%, ke 9.3% |
| Two-Stage Excess Return | Asset | $562.15 | 0.17x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $102.81 | 0.91x | yes | Rev $6.4B, growth 19% (input: historical growth; tapered), Terminal P/S: 5.3x / 6.5x / 7.7x (bear / base = today's held flat / bull, cap 12x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | — | — | no | — |
| Residual Income | Asset | $184.09 | 0.51x | yes | BV $12.46 + 5yr PV of (ROE (TTM) 81.7% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $15.62 | 5.97x | yes | √(22.5 × EPS $0.87 × BVPS $12.46) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | — | — | no | — |
| FCF Yield | Earnings | $153.05 | 0.61x | yes | FCF $16838.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $0.73 | 127.67x | yes | EPS $0.87 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median) |
| ROIC-Justified P/B | Asset | — | — | no | — |
| P/Sales Sector | Relative | $43.14 | 2.16x | yes | Revenue $6.45B × sector P/S 3.0x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $9.41 | 9.90x | yes | EPS $0.87 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Share count CAGR (dilution) | 3.1% |
Custody and consolidated-fund balance sheet: deposits, client cash, and fund-level debt are not corporate leverage, and operating cash flow follows client flows. Net-debt, coverage, and cash-burn lenses are suppressed as misleading; share-count CAGR is kept. The fee-earnings read above is the valuation basis.
Bullet Takeaways
- Interactive Brokers runs the most automated brokerage in the business, and the result shows up in one number: an adjusted pre-tax profit margin of about 77% in the first quarter of 2026, a level a labor-heavy broker cannot approach.
- The structural exposure is interest rates: net interest income was $904 million in the quarter, more than half of revenue, so a meaningful decline in short-term rates would compress the largest profit stream even as accounts keep growing.
- Watch the account engine: customer accounts grew 31% to 4.75 million and customer equity reached $789.4 billion, and that compounding client base is what turns commission and interest growth into a durable trajectory.
Bull Case
The moat is automation, and it is the kind that widens with scale rather than eroding. Interactive Brokers built its brokerage as a software company that happens to be regulated, routing orders through systems that, in the company's own words, "continuously searches for the best available price and, unlike most other routers, dynamically routes and re-routes all or parts of a customer's order to achieve optimal execution and among the lowest execution and commission costs in the industry". The economic consequence is a cost structure no human-staffed competitor can match. In the first quarter of 2026 the adjusted pre-tax profit margin reached about 77%, up from 73% a year earlier. A broker keeping 77 cents of every pre-tax revenue dollar is not running a normal business; it is running a toll road on global trading.
The customer engine compounds, which is what separates a good year from a durable franchise. Accounts grew 31% year over year to 4.75 million, and customer equity rose to $789.4 billion. Each new funded account adds commission revenue when it trades and interest revenue on the cash and margin balances it carries, and those balances are large: client uninvested cash reached a record $169 billion, up 35%. That is the flywheel. More accounts bring more cash, more cash earns more interest, and the low-cost platform attracts the next cohort of accounts. Return on equity runs above 80% on the public float, an extraordinary figure that reflects how little capital the automated model consumes to generate its earnings.
The growth is broad-based rather than dependent on one revenue line, which is the bull's durability argument. In the first quarter, commission revenue rose 19% to $613 million on higher trading across stocks, futures, and options, while net interest income rose 17% to $904 million. Both engines fired at once. The methods reflect a business the market is not overpaying for relative to its quality: the asset, relative-multiple, and growth lenses all support the price, marking this as a value-and-quality name rather than a stretched growth bet. For a franchise compounding accounts at 30% with a 77% pre-tax margin, that combination is the bull case in full.
Bear Case
The structural vulnerability sits inside the funding side of the business, where the broker's economics depend on a variable it does not set. More than half of Interactive Brokers' revenue is net interest income, $904 million of the quarter's $1.67 billion, earned on the spread between what it pays clients on cash and what it earns investing those balances and lending on margin. The company is explicit that this stream rides the rate environment: in its own disclosure it measures return on interest-earning assets using net interest margin and notes that in a normal rate environment it invests a portion of customer balances to earn that spread. That dependence is the bear case's spine. A sustained decline in short-term rates compresses the spread on a $169 billion cash pile, and no amount of account growth fully offsets a falling rate on the single largest profit line.
The second pressure is competitive and it works on the other engine. Interactive Brokers competes in a brokerage industry that has spent a decade driving commissions toward zero, and while its automation lets it profit at price points that bury rivals, the direction of travel on per-trade economics is down. The peer set, exchanges and market-structure names like Cboe and Tradeweb and asset managers like Brookfield and Janus Henderson, compete for the same trading and custody dollars, and the retail-brokerage front specifically remains a price war. Commission growth of 19% in the quarter came from volume, not price, and volume is the cyclical part: trading activity swells in volatile, rising markets and shrinks when investors retreat. A quieter market would slow the commission engine just as a lower-rate environment slowed the interest engine.
The valuation is fair rather than cheap, which limits the cushion if either engine slows. The price is supported by the methods but not deeply discounted by them, and the implied assumption embeds about eight years of elevated growth, a long runway that requires both the account compounding and the favorable rate environment to persist. The share count has grown at about 3.1% a year, modest dilution that the bull case has to clear. The downside is not solvency; a broker with this margin and capital efficiency is not fragile in that sense. It is that the price assumes the two engines keep firing together, and the conditions that power them, high rates and high trading activity, are exactly the conditions that do not last forever. If rates fall and markets quiet at the same time, the 77% margin meets a smaller revenue base, and a fairly-valued stock becomes an expensive one.
Valuation
What the price assumes is best read through the fee-earnings lens rather than a balance-sheet one, because for a broker the deposits, client cash, and margin loans on the balance sheet are customer assets, not corporate leverage. On that basis, the price embeds roughly eight years of continued elevated growth in the fee-and-interest earnings stream. That is a long persistence assumption, and it is demanding for a business whose largest revenue line is geared to interest rates, but it is not the speculative kind of bet: the methods broadly support today's price rather than requiring a leap.
Where the price sits against the methods is favorable, which is unusual for a high-quality compounder. The relative-multiple methods, reading the price against a sector earnings multiple, land above the price near $145, implying it is not expensive on peer comparison. The asset-based methods, anchored on a return on equity above 80%, also land at or above the price. Only the most conservative single readings, a zero-growth earnings yield and a Graham floor, sit below it. The pattern says the price is value-and-quality supported rather than a forward bet stretched beyond what standard frames can defend. For a financial, the right profitability lens is return on equity, and at north of 80% on the public float, Interactive Brokers earns far more on its capital than the cost of that capital, which is the structural reason the methods endorse the price.
The balance-sheet read is deliberately suppressed here, and correctly so. A broker-dealer's deposits and client cash are not debt, its operating cash flow follows client flows rather than profitability, and the usual net-debt and coverage lenses would mislead. The capital-return picture is the relevant one: the share count has grown modestly at about 3.1% a year, and the company recently lifted its dividend. The decisive figure for Interactive Brokers is not a valuation gap; it is the 77% pre-tax margin and what happens to it if the rate environment that feeds the interest engine turns. The methods say fair; the bet is on persistence.
Catalysts
Interactive Brokers reported record first-quarter 2026 results, and the stock reacted sharply higher. Net revenues rose 17% year over year to $1.67 billion, with commission revenue up 19% to $613 million on higher trading in stocks, futures, and options, and net interest income up 17% to $904 million. The adjusted pre-tax profit margin improved to about 77% from 73% a year earlier, and the company raised its dividend.
The account and balance metrics were the strongest forward signal. Customer accounts grew 31% to 4.75 million, customer equity rose to $789.4 billion, and client uninvested cash reached a record $169 billion, up 35%. Those balances are the fuel for future net interest income, which makes the rate environment the single most important external variable to watch, since a meaningful move in short-term rates would change the spread the company earns on that cash. The other watch items are trading volumes, which drive the commission line and tend to swell in volatile markets, and the pace of account growth, because the compounding client base is what carries the franchise through any single quarter's market conditions.
Peer Cohorts (Per Segment, With Filing Citations)
Electronic brokerage (single segment) (reported)
- VIRT (Virtu Financial, Inc.)
- (no filing in the citation store)
- SCHW (SCHWAB CHARLES CORP)
- (no filing in the citation store)
- HOOD (Robinhood Markets Inc)
- (no filing in the citation store)
- FRHC (FREEDOM HOLDING CORP.)
- (no filing in the citation store)
- TW (Tradeweb Markets Inc.)
- (no filing in the citation store)
- PIPR (PIPER SANDLER COMPANIES)
- (no filing in the citation store)
- BGC (BGC Group, Inc.)
- (no filing in the citation store)
- CME (CME Group Inc)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Interactive Brokers FY2025 10-K, accession 0001381197-26-000062 · Interactive Brokers Q1 2026 earnings release, 2026