Interactive Brokers Group Inc (IBKR)

Investment Committee Summary

Investment Thesis

At $93.05 (25 August 2026) Interactive Brokers changes hands near 38 times forward earnings — a growth-broker premium rather than a broker-dealer average, and well above where the large listed brokers and wirehouses trade. The price assumes the account-gathering engine and net interest on the client cash sweep keep compounding at a mid-teens clip. The engine's mid-cycle path does not so much contradict that as fully discount it: the twelve-month target of $89.54, the probability-weighted $85.90 and the triangulated $88.68 all cluster within a few points of spot, leaving the shares fairly valued against the blend at -5%. Almost all of the modelled dispersion comes from the multiple rather than from near-term earnings, which is the tell that this is a bet on the regime rather than on the franchise. That is the HOLD case: the base path is roughly in the price, and the upside cases require sustained double-digit account growth alongside a still-supportive rate backdrop. The single most damaging risk is a rate-and-pricing reset that compresses net interest income and the multiple at the same time.

Narrative drafted 2026-08-16 by claude-opus-5 under supervision; reviewed by Marinus 2026-08-16.

The dashboard below is the whole argument on one page: spot ($93.05) against each valuation anchor, the scenario tree, technicals and the options-implied move.

Anti-Thesis (The Real Bear Case)

The highest-probability bear is the base case failing to earn its multiple. The premium rests on two cyclical tailwinds — elevated net interest income on segregated client cash, and buoyant trading volumes — that both fade as policy rates ease and activity normalises. Strip the rate tailwind and the largest earnings line contracts; strip the volume and daily trade counts fall with it. Earnings need not collapse for the thesis to break: a de-rate from 38 times forward earnings toward the peer-broker band, on a merely flat earnings base, takes the shares well beneath $93.05 without any structural impairment at all. The structural variant is worse and not far-fetched — a zero-commission, rate-normalised, competitively contested brokerage market — and its implied target sits below the fifty-two-week low. The market is capitalising what looks like a mid-cycle peak as though it were the run-rate.

Key Debate

P/E Multiple explains 91% of Monte Carlo outcome variance — i.e. value is set by the multiple the market will pay, a rate/sentiment regime bet as much as an earnings bet.

What the Market Is Pricing In

At the current price, the market pays 34.3× consensus forward EPS, vs the house DCF terminal 30.0×, and a peer median 18.4×. The house DCF sits 1% above spot, so the market is pricing in less than the house case — roughly 0.1pp of revenue CAGR.

Variant perception: the house view is below-consensus, and the thesis is primarily FCF-driven.

Scenario Analysis

The scenario tree spans a structural 'Structural — Zero-Commission / Rate / Competition Reset' downside ($35.50) to a 'Bull — Re-Rate' bull case ($153); the probability-weighted blend (PWEV $85.90) is -8% versus spot.

Share-count charge: none applied. The probability-weighted value above is the gross per-share figure — no annual dilution is deducted — stock-based compensation runs at 1.8% of revenue; free cash flow net of SBC is $15.63B. SBC is therefore disclosed, not charged: read the per-share figures as before dilution.

Scenario rationale — the driver path behind every target:

• Structural — Zero-Commission / Rate / Competition Reset (20%, $35.50). Structural impairment — fee compression / rate / competition reset: earnings AND the multiple compress together. Target sits below the 52-week low by construction.
• Market-Activity Recession (17%, $59.60). Cyclical downturn — client assets + transaction & advisory fee pool + net interest income weakens for 1–2 years before normalising.
• Base — Client Assets + NII + Trading (35%, $92.80). Mid-cycle — normalised client assets + transaction & advisory fee pool + net interest income; disciplined capital allocation; steady returns.
• Growth — Asset Gathering / Rate Tailwind (20%, $120). Upside — asset gathering + rate tailwind lifts earnings above mid-cycle; the multiple expands modestly.
• Bull — Re-Rate (8%, $153). Upside tail — sustained tight conditions or a structural re-rate on asset gathering + rate tailwind.

Valuation Triangulation

Three weighted anchors — an intrinsic dcf, a scenario-weighted pwev and a monte carlo median (student-t + regime switching) — read them with their basis in mind. The Monte Carlo, the DCF terminal and any peer re-rate key off a market multiple, so they are not fully independent; only discounted cash flows themselves are genuinely multiple-free. The discipline is to read the spread and weight the cash-based view, not to treat three numbers as three independent votes.

The house blend DECLARES five anchor weights — DCF 35%, scenario PWEV 25%, Monte Carlo 15%, sum-of-parts 15%, peer re-rate 10%. For this name sum-of-parts, peer P/E re-rate are not computed, so 25% of the declared weight is redistributed across the anchors that exist — which is why the weights above differ from the declared ones. The fair value is unaffected by this disclosure; the blend has always worked this way.

Peer EV/Revenue re-rate — 0% weight: it duplicates the peer-multiple information already carried by the Peer P/E anchor while ignoring margin mix; weighting both would double-count the peer view. Shown as a cross-check.

Monte Carlo — the outcome distribution

10,000 paths, Student-t shocks (fat tails) with a regime-switching overlay. The median lands at $81.48 and 35% of paths finish above spot. The variance decomposition shows the p/e multiple is the dominant swing factor (91% of variance). Value is a multiple bet: fundamentals move the answer far less than the rating does.

DCF — the cash-flow anchor

Independent of the market multiple: a 5-year path, WACC 9.0%, 30.0x terminal FCF multiple → $93.75. This anchor is deliberately the heaviest (47%): it is the valuation least hostage to the current multiple regime.

Peer benchmarking — relative value

Against the peer cohort, re-rating to the peer-median EV/Revenue multiple implies $60.70; the peer-median forward P/E is 18.4x, but the engine carries no P/E-implied price for this name (no forward-EPS basis at the peer step). A premium is only justified by superior growth/margins; otherwise it is multiple risk. Excluded from the weighted blend — shown only as a market cross-check.

Across all anchors the spread is 38% of the median — wide (genuine disagreement — the blend carries low valuation confidence).

Sensitivity

DCF/share — WACC × terminal multiple

DCF/share — revenue CAGR Δ × op-margin Δ

Tornado — DCF/share swing by driver (widest first)

Company lever — SoP/share vs Brokerage & Capital Markets multiple (AI re-rating) (base 37.0x)

Peer Quality & Weighting

Quality-weighted forward P/E: 31.0× (simple median 18.4×). Direct peers count 100%, segment 50%, broad 25%.

Historical-range cross-check: 52-week range $52.90–$97.84, centre $71.90 (-23% vs spot); spot sits at the 89th percentile of the range. Low-weight mean-reversion cross-check, not a fundamental anchor.

Risk / Reward & Margin of Safety

That ratio compares triangulated upside against the probability-weighted bear target, not the extreme tail; with a leg missing it is withheld rather than computed from a magnitude. Bull case (Bull — Re-Rate): $153.

Company Overview & Business Model

Interactive Brokers Group Inc — FINANCIAL SERVICES · CAPITAL MARKETS. Interactive Brokers Group, Inc. is a global automated electronic broker. The company is headquartered in Greenwich, Connecticut.

How it makes money.

Edge. Narrow moat. Authored moat rationale withheld pending re-authoring.

Revenue-Segment Breakdown

The company-specific drivers behind the valuation — each segment carries its own growth, margin, multiple and capex intensity. (Tags: FACT reported · ESTIMATE from disclosures · INFERENCE judgment.)

Named Exposures

Demand & pricing cycle (FACT/ESTIMATE)

Capital intensity & shareholder returns (ESTIMATE)

Structural risk vs optionality (INFERENCE)

Balance Sheet & Liquidity

Balance-sheet data as of 2025-12-31 (Alpha Vantage).

Capital Allocation

Free-Cash-Flow Quality

Accounting quality: SBC 1% of revenue; cash conversion (OCF/NI) 363% — cash-backed.

Competitive Moat

Moat sources:

• Structurally lowest-cost automated execution and margin-lending platform (unit-cost advantage, FACT)
• Global multi-jurisdiction regulatory licences as an entry barrier for a single unified account (FACT)
• Net-interest float on ~$100bn+ client cash as a rate-geared earnings engine, not a durable moat (INFERENCE)
• Absence of high switching costs / lock-in vs. SCHW, Fidelity, Robinhood (INFERENCE)

Earnings-Call Disconfirmation & Sentiment

Derived signals from the MCH market-data store (Alpha Vantage transcripts + news). Quantitative tone only — a disconfirmation flag, not a substitute for reading the call.

Management vs analyst tone (2026Q2): management +0.42 vs analyst floor +0.00 → delta +0.42 (n=20 mgmt / 23 Q&A; 54th pctile across the S&P book, z +0.1).

Flag: TYPICAL — management-vs-analyst tone within the normal cross-sectional range.

News (last 365d, 223 articles): avg ticker sentiment +0.16 (bullish 26% / bearish 3%)

Consensus & Market Expectations

_Consensus figures: Alpha Vantage sell-side aggregates. Where the house view sits materially above or below the street, the divergence is itself a datum — see the thesis.

Catalyst Calendar

• 2026-10-15 (~52d) — Quarterly earnings — est. EPS $0.65 (AV EARNINGS_CALENDAR)
• 2026-10-20 (~57d) — Potential further stock split / index-inclusion mechanics follow-through (authored)
• 2026-12-01 (~99d) — Crypto / prediction-market / new-product platform expansion milestones (authored)
• 2027-03-15 (~203d) — Fed rate-path decision cycle materially re-prices cash-sweep NII (authored)

Forecast Track Record

• EPS surprise: beat 62% of the last 8 quarters; average surprise +4.8%.
• Prior-forecast backtest (12 snapshots, 2026-06-27→2026-08-20): directional hit-rate 58%; mean predicted -1.1% vs realised +2.8%. Disconfirming track record is reported, not suppressed.

Catalyst Timeline

7 catalysts in the next 90 days (of 17 tracked). Importance 1–3; confidence 0–1.

_Sources: extended.catalysts, data/catalysts/.json, data/catalysts/macro.json, AV DIVIDENDS, opex 3rd-Friday calc.

Regulatory & Legal Risk

Probabilities and sensitivities are analyst estimates, not market-implied.

Scenario Macro & Key Risks

Decision Rules (Machine-Checked)

Stance: Hold — 0 bullish / 0 bearish / 0 caution rules triggered of 6 evaluable (0 lacked data).

Machine-checked rules over disclosed inputs. The authored falsification triggers elsewhere in this report are analyst judgment and are NOT evaluated here. The stance is a portfolio-management signal and does not modify the published research rating.

Reasons the Thesis Could Fail (Falsifiable)

Pre-registered signals that would break the thesis — each polices a specific scenario boundary and is checked at every earnings update:

• Total DARTs (daily average revenue trades), YoY < -8% (2 consecutive prints). A sustained double-digit decline in transaction volume moves the base case toward the Market-Activity Recession path where growth turns negative; the threshold sits between the base and recession volume proxies.
• Net interest income, YoY < -10% (2 consecutive prints). NII on segregated client cash is the largest single earnings line; a sharp decline signals the rate tailwind reversing, pulling op margin toward the recession scenario's 0.75.
• Pre-tax profit margin < 0.72 (2 consecutive prints). The guided base margin is ~0.83; a drop below 0.72 (midpoint of base and the structural 0.68) would confirm pricing or cost pressure consistent with the structural-impairment path.
• Net new accounts, YoY growth < 10% (2 consecutive prints). (rationale withheld pending re-authoring — frozen figure or verdict)
• Regulatory / commission structure change (e.g. PFOF ban, mandated fee reset) == enacted (single event). A discrete rule change to order-flow economics or a mandated commission reset is the direct trigger for the structural scenario in which earnings and the multiple compress together.

Fact / Inference / Speculation

• FACT: Spot $93.05; 52-week range $52.90–$97.84; engine rating HOLD; house target $89.54 (-4%). (source: Alpha Vantage 2026-08-24, 25 August 2026)
• INFERENCE: Triangulated FV $88.68 (-5% vs spot · triangulated FV); the rating tracks the Monte-Carlo + scenario-PWEV core; the cash-flow anchor sits above the multiple-discipline core.
• SPECULATION: At current prices the embedded bet is that the market keeps paying the current multiple through the capex cycle — a regime call the engine cannot verify from fundamentals alone.

Conviction Score

Research Conviction measures the strength and quality of the research setup — input coverage, financial quality, valuation support, process agreement. It is NOT the probability that the recommendation succeeds; the forecast track record section is the evidence on that.

67.6/100 (confidence band 53.3–81.9), 85th percentile of 858 covered names (as of 2026-08-24). Weighted composite under config ros-1.19.0 — every component and its inputs below.

Missing inputs (financial strength, macro tailwinds) are excluded and the remaining weights renormalised; the confidence band widens accordingly.

Score history: 67.4 → 67.4 → 66.8 → 65.1 → 65.1 → 65.0 → 67.6 → 67.6.

Probability-Weighted Return Profile

Horizon: 1 year — at this horizon CAGR equals total return by definition. Expected values are the probability-weighted sums over the full scenario set below.

The gross expected return is the probability-weighted scenario return (it reconciles to the gross PWEV); the diluted figure applies the SBC share-count charge and matches the published PWEV-based target.

Expected Alpha

Expected return minus the return this name is REQUIRED to deliver for its risk (1-year horizon). Constants are pre-registered (preregistered-static (amendment #2, 2026-07-29); not fitted to MCH outcomes).

A negative expected alpha does not change the rating — it says the expected return does not clear the risk-adjusted hurdle at today's price. Rating mechanics are unchanged by this section.

Probability Cross-Checks

Not authoritative. The scenario probabilities in this report are AUTHORED — a judgement about how the world might go, not a measurement. Nothing below modifies them, the target, the rating or any position size. These checks ask only whether anything outside our own model agrees with us; where it does not, that is information for the reader, not a correction we have quietly applied.

Authored set: 5 scenarios, probabilities summing to 1.0, mean target $85.9.

Factor Exposures

Cross-sectional percentiles over 858 covered names (style scores sector-demeaned; thematic = return-beta to the theme's proxy ETF). 50 = estate median.

Market interaction: correlation vs SPY +0.59, vs QQQ +0.57 (trailing ~1y daily returns).

Options Intelligence

Preferred structure: Covered Call. The selector reads the equity view (direction) and the volatility surface — nothing here re-prices the chain.

• range-bound with fair premium — harvest income against a holding
• Direction neutral from the overlay conviction/rating (read-only input).
• IV/RV at the 48th percentile of the cross-section → mid vol bucket. This is the measure that selects the structure above: it ranks how rich this name's implied vol is against its own realised vol, relative to other names.
• Reported alongside and not used to select: this name's own ATM IV sits at the 67th percentile of its own month-end history (decile 7). The two measures disagree here — vol is high for this name by its own history while its options are not unusually rich against its realised vol. Where they diverge, the cross-sectional measure is the one acting.
• IV term structure is in contango (longer-dated richer, slope +2.9pp) — favour longer-dated ownership (LEAPS) or calendars that are long the cheaper front.

IV term structure (contango, slope +2.9pp): 32-DTE 39% · 116-DTE 40% · 389-DTE 42%

Economics copied verbatim from the options overlay (priced from the listed chain (EOD marks)); the selector does not re-price.

Alternatives: Cash-Secured Put. IV rank shown via the name's own monthly IV history (advisory); structure selected on the cross-sectional IV/RV percentile. Model output for research and education only — not individualised investment advice. Position-sizing and stance figures are mechanical outputs of the disclosed rules and inputs; they do not consider any person's objectives, financial situation, or tax status.

Position Sizing Framework

Model output for research and education only — not individualised investment advice. Position-sizing and stance figures are mechanical outputs of the disclosed rules and inputs; they do not consider any person's objectives, financial situation, or tax status.

Options Overlay

A defined-risk way to express the HOLD equity view. Chain as of 2026-08-24 — end-of-day marks — indicative, not executable quotes.

Market signals — ATM IV 38.6% (moderate regime) · expected move ±8.9% (2026-09-25) · put/call OI 0.65 · ATM Δ 0.54 / Θ -0.07 / ν 0.11 · next earnings 2026-10-15. Direction: NEUTRAL (implied return -4.7% to triangulated fair value $88.68).

Covered Call (if held) (Income / neutral) — Short 100 C · 2026-09-25 · premium $1.6 · yield 1.7% · priced from the listed chain (EOD marks)

Converts a near-fair holding into income by agreeing to sell at a higher strike — worth weighing when upside looks limited near fair value and being called away is acceptable. Illustrative — no outcome is implied or guaranteed.

Put Spread (income) (Income / would-own) — Short 86 P / Long 79 P · 2026-10-02 · net $1.18 · net entry $84.83 · yield 1.4% · RoR 20.0% · max loss $5.83 · priced from the listed chain (EOD marks)

Gets paid to wait for a lower entry, with the tail capped: the sold put collects premium while the cheaper long wing below it caps the maximum loss at the spread width — a defined-risk alternative to a naked cash-secured put.

Protective Collar (if held) (Hedge) — Long 85 P / Short 100 C · 2027-03-19 · net $1.6 · floor -9.0% · cap +7.0% · priced from the listed chain (EOD marks)

For a holder who wants to stay invested but cap risk: the sold call funds most of the protective put, fencing the position into a band — a way to ride out a de-rating without selling.

Indicative options structures — a defined-risk expression of the equity view, model-and-market illustrated from the last-close chain. NOT personalised advice or an executable quote; premiums, IV and greeks move intraday. Options carry the risk of total loss of premium. Not a registered financial adviser.

Rating Bridge

Rating = HOLD because:

• Probability-weighted scenario value implies -8% vs spot
• Monte Carlo median implies -12% vs spot
• DCF fair value implies +1% vs spot — but this is terminal-value sensitive (exit-multiple $93.75 vs Gordon $69.42, 26% apart), so it carries less weight
• Bear case (Structural — Zero-Commission / Rate / Competition Reset) downside is -62% vs spot
• Net: the valuation anchor itself sits 4.7% below spot, so there is no reward leg to weigh against the bear case and the reward-to-risk ratio is withheld rather than computed off a negative upside. The rating is not asymmetric enough for a Buy and not impaired enough for a Sell — hence Hold.

Model Appendix

DCF — line items

FCF is bridged: NOPAT + D&A − Capex − ΔNWC (capex intensity 2% of revenue, weighted from the segments) — not a single conversion fudge.

WACC 9.0% · Σ PV(FCF) $16B + PV(terminal) $90B = EV $105B; + net cash $58.5B → equity $164B ÷ diluted shares $1.75B = $93.75/share (exit-multiple terminal).

• Gordon terminal at 2.5% → $69.42/share — a genuinely non-multiple, cash-based cross-check; the exit-multiple and Gordon values bracket the terminal-value risk.
• Incremental ROIC on the forecast capex ≈ 172% vs WACC 9.0% → above WACC — the build is value-creative.

Peer set

Implied prices at the peer medians: EV/Rev → $60.70 (no P/E-implied price — no forward-EPS basis at the peer step).

Weighted fair-value math

Assumption Register

Sensitivity-ranked drivers (widest fair-value swing first): Revenue CAGR ±3pp (16.0); Terminal × ±15% (15.0); WACC ±1pp (5.0); Op margin ±3pp (5.0); Capex intensity ±15% (1.0).

Inputs, Sources & Confidence

Every load-bearing input, labelled by type and confidence. (reported fact · company guidance · consensus estimate · market data · house estimate · inference.)

Research Provenance

Load-Bearing Assumptions

DCF: WACC 9.0%, terminal multiple 30×, FY+5 revenue $9B. Triangulation leans 47% on DCF, 33% on PWEV, 20% on the Monte Carlo median.