• Wondering if Interactive Brokers Group stock still offers value after its strong run, or if you might be late to the party? This article will help you frame that question clearly before looking at the numbers.
• The stock last closed at US$87.00, with returns of 3.1% over 7 days, 9.6% over 30 days, 29.4% year to date and 67.2% over 1 year, plus a very large gain over 5 years that hints at how the market has been reassessing the company.
• Recent coverage has focused on Interactive Brokers Group's position as a listed brokerage and trading platform in a competitive US capital markets sector, as well as its ability to attract and retain active clients in a technology heavy business model. These themes help explain why investors are paying close attention to the stock price and reassessing what counts as a reasonable valuation.
• Right now Interactive Brokers Group carries a valuation score of 3/6, which suggests that some valuation checks point to the stock being undervalued while others do not. The next sections will walk through the usual valuation methods and then finish with a different way of thinking about value that many investors overlook.

Approach 1: Interactive Brokers Group Excess Returns Analysis

The Excess Returns model looks at how much profit a company is expected to earn above the return that shareholders require, then adds that stream of “excess” profits to today’s book value per share.

For Interactive Brokers Group, the starting point is a Book Value of US$12.54 per share and a Stable EPS estimate of US$7.79 per share, based on the median return on equity from the past 5 years. The model applies a Cost of Equity of US$3.63 per share, which leaves an Excess Return of US$4.16 per share. That excess is supported by an Average Return on Equity of 19.85% and a projected Stable Book Value of US$39.22 per share, using weighted future book value estimates from 2 analysts.

Putting these inputs together, the Excess Returns model produces an estimated intrinsic value of about US$112.02 per share. Compared with the recent share price of US$87.00, this implies the stock is around 22.3% undervalued according to this framework.

Result: UNDERVALUED

Our Excess Returns analysis suggests Interactive Brokers Group is undervalued by 22.3%. Track this in your watchlist or portfolio, or discover 50 more high quality undervalued stocks.

Approach 2: Interactive Brokers Group Price vs Earnings

For profitable companies, the P/E ratio is a useful shortcut because it links what you pay for each share to the earnings that the business is currently generating. It lets you compare how the market is pricing those earnings across different stocks and sectors.

What counts as a "normal" or "fair" P/E ratio usually reflects two things: how fast earnings are expected to grow and how risky those earnings are. Higher expected growth or lower perceived risk can justify a higher multiple, while slower growth or higher risk usually points to a lower one.

Interactive Brokers Group currently trades on a P/E of 37.34x. That sits below the Capital Markets industry average of 40.63x but above the peer average of 22.13x. Simply Wall St also calculates a proprietary Fair Ratio of 20.98x, which is the P/E you might expect given factors such as the company’s earnings profile, industry, profit margins, market cap and risk characteristics. This Fair Ratio can be more useful than simple peer or industry comparisons because it adjusts for those company specific features instead of relying on broad group averages. Compared with the current P/E, the Fair Ratio suggests the stock is trading at a richer level than those fundamentals would typically imply.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Interactive Brokers Group Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Meet Narratives, where you write a simple story about Interactive Brokers Group that ties your view of its future revenue, earnings and margins to a Fair Value, then compare that to the current price on Simply Wall St's Community page.

Instead of just seeing a single number like a P/E or target price, a Narrative links what you believe about the business, such as how its interest income, crypto and forecast contract initiatives or global expansion might play out, directly to a forecast and valuation that are updated automatically when new earnings or news arrive.

On Simply Wall St, millions of investors use Narratives as an accessible tool to frame decisions by asking a simple question: if their Interactive Brokers Group Fair Value sits closer to a bullish view around US$85.00 or a more cautious view near US$58.09, and then checking how that compares with today’s share price before deciding whether the stock looks expensive, cheap or roughly in line with their expectations.

Do you think there's more to the story for Interactive Brokers Group? Head over to our Community to see what others are saying!

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.