Interactive Brokers Group Inc. (NASDAQ: IBKR) is a global electronic broker that is fully automated. Hedge and mutual funds, exchange-traded funds (ETFs), registered investment advisers, proprietary trading groups, introducing brokers, and individual investors can all use the company's custody and service accounts. As an electronic broker, the Company executes, clears, and settles transactions for both institutional and individual customers across the world. The company specializes in executing orders and processing trades in stocks, options, futures, currency, bonds, mutual funds, ETFs, metals, and cryptocurrencies in around 150 electronic exchanges and market centers across the world.
Key Takeaways from Q1FY22 financial results
Key highlights include:
Other key highlights from Q1 FY22 Financial results
Balance Sheet & Liquidity Position
Top 10 shareholders
The top 10 shareholders together form around 49.79% of the total shareholding, while the top 4 constitute the maximum holding. Kayne Anderson Rudnick Investment Management, LLC and The Vanguard Group, Inc hold the maximum stake in the company at 8.64% and 8.45%, respectively, as also highlighted in the chart below:
Top 10 Shareholders; Analysis by Kalkine Group
With a 50-basis point rate rise, the corporation is predicted to generate an additional USD 175 million per year, and with the Fed likely to raise rates eight times, each subsequent 25 basis point will yield an additional USD 25 million. For the coming year, the accounts growth rate is predicted to be over 30% and the business wants to reach 10 million deals every day. With the company's continued development in client services and expansion of operational locations, fixed expenditures are likely to rise by roughly 15%. Finally, the company's operating margins are predicted to stay in the mid-60s in 2022.
Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Over the past six months, IBKR's share price has corrected by 26.90%. The stock is currently leaning towards the lower end of its 52-week range of USD 52.18 to USD 82.83. We have valued the stock using the Price/Earnings multiple-based relative valuation method and arrived at a target price of USD 68.14. We believe that the company is trading at a discount from its peer's average, considering its fall in revenue and profitability for the Q1 FY22, but strong fundamentals, competitive advantages in profitability margins, and a good cash position give bullish estimates for the upcoming near future. We have taken peers like Goldman Sachs Group Inc, Morgan Stanley, and Charles Schwab Corp for the evaluation of the intrinsic value.
Considering the strong fundamentals, robust margins, dividend yield, positive outlook, associated risks, and current valuation, we give a "Buy" recommendation on the stock at the closing price of USD 54.04 as of 18th May 2022.
IBKR Technical Chart, Data Source: REFINITIV, Analysis by Kalkine Group
Technical Analysis Summary:
Technical Indicators Defined
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.
Note 3: The report publishing date is as per the Pacific Time Zone.
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