Interactive Brokers (IBKR) Valuation in Focus Following S&P 500 Index Inclusion

If you are weighing your next move with Interactive Brokers Group (IBKR), this week’s big news probably has your attention. The company is set to join the S&P 500, replacing Walgreens Boots Alliance. That leap into one of the world’s most-followed indexes is not only a symbolic milestone; it also requires countless index funds and ETFs to add IBKR to their portfolios. It is no surprise the stock saw a bump in after-hours trading following the official announcement.

Stepping back, this index inclusion caps off a dramatic climb for Interactive Brokers Group. The stock is up 99% over the past year and has gained 38% since January, signaling strong momentum even before the S&P news was released. It comes on the heels of product launches, such as the recent rollout of the Connections tool for traders, and follows a multi-year run where IBKR outpaced the broader financial sector. With brisk revenue and net income growth in the most recent year, sentiment seems to be shifting in the company’s favor.

But after this year’s surge, is Interactive Brokers Group still flying under the radar, or has the market already priced in its next leg of growth?

Most Popular Narrative: 5.2% Undervalued

According to community narrative, Interactive Brokers Group is viewed as modestly undervalued. Analysts see further upside despite recent outperformance and headline index inclusion.

The introduction of new products and enhancements, including the strengthened ATS with new liquidity providers and order types, enhancements to the IBKR Financial Advisor Portal, and the launch of securities lending for Swedish stocks, suggests potential for increased trading activity and higher commission revenue. Record client credit balances at $107.1 billion, up 36% over last year, indicate strong trust in the platform and substantial funds availability for trading. This could possibly lead to higher net interest income from margin loans as clients leverage their positions.

Want to know what’s behind this bullish outlook? The real story is in the numbers that power this valuation. Hint: analysts aren’t just looking at past momentum. Find out which future growth assumptions and ambitious profit metrics are woven into this narrative’s fair value calculation.

Result: Fair Value of $66.22 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, unpredictable market conditions and growing competition could curb Interactive Brokers Group’s growth story if trading volumes decrease or platform trust begins to falter.

Find out about the key risks to this Interactive Brokers Group narrative.

Another View: Multiples Tell a Different Story

Looking beyond the first method, a quick glance at how the market values Interactive Brokers Group compared to others in its industry shows a less optimistic picture. This method suggests that shares might be on the pricier side and calls into question the previous narrative of undervaluation.

See what the numbers say about this price — find out in our valuation breakdown.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Interactive Brokers Group for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Interactive Brokers Group Narrative

Keep in mind, if these perspectives don't match your own or you prefer to dive deeper into the data, you can quickly build your own view in just a few minutes as well: Do it your way.

A great starting point for your Interactive Brokers Group research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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