Interactive Brokers Group, Inc. (IBKR)

FairStock Score: 49/100 — MIXED

Key Financials

Strengths

• Strong net margin of 10.37% and ROE of 23.51% demonstrate operational excellence and capital efficiency
• Diversified revenue streams across execution, clearing, custody, and margin lending reduce concentration risk
• Robust technology platform and network effects create meaningful competitive moat in capital markets
• Solid Q4 2025 performance with $2.7B revenue and $284M net income shows resilient business model
• Market leadership in electronic brokerage with institutional and retail customer bases

Concerns

• Valuation is egregiously expensive at 29.49 P/E and 45.94 EV/EBITDA with Graham Number of $13.17—price is 5x+ fair value
• Altman Z-Score of 0.58 indicates financial distress despite profitable operations, suggesting leverage-related risks
• ROCE of 2.47% is abysmal and contradicts ROE, revealing returns are artificially inflated by high leverage (D/E 1.24)
• Piotroski F-Score of 6/9 shows mediocre financial quality; FCF yield of 1.4% is insufficient for capital returns

AI Analysis

Interactive Brokers presents a peculiar paradox that troubles my value-oriented sensibilities. On one hand, the business model is remarkably efficient—a 10.37% net margin in Q4 2025 demonstrates operational excellence in a competitive brokerage landscape. With $116.6B in market cap and 3,182 employees, they've achieved impressive scale and ROE of 23.51%, suggesting capital is deployed effectively. The company operates a genuine moat through network effects, technology infrastructure, and entrenched customer relationships across institutional and retail segments. However, valuation overwhelms substance here. At $67.49 with a Graham Number of merely $13.17, we face a negative margin of safety exceeding 400%. The P/E of 29.49 and EV/EBITDA of 45.94 suggest the market has priced in perpetual growth that seems unrealistic. The Altman Z-Score of 0.58 signals distress—alarming for a capital-light business. ROCE of just 2.47% contradicts the ROE figure, suggesting concerning leverage effects from their 1.24 debt-to-equity ratio. The Piotroski F-Score of 6/9 indicates middling financial quality, while FCF yield of 1.4% is anemic. This appears to be a quality business suffering from a severe valuation bubble. Mr. Graham would demand a substantial discount to intrinsic value; I see none. The risk-reward is decidedly unfavorable at current prices.

Bull Case

Interactive Brokers benefits from secular growth in retail investing, crypto adoption, and globalization of capital markets. With expanding emerging market presence and cryptocurrency offerings, the company could capture significant new TAM while maintaining pricing power, justifying premium multiples for a decade-long compounder.

Bear Case

Competitive pressures from zero-commission rivals, regulatory headwinds, and cyclical trading volume dependence threaten margins. If a market downturn or regulatory crackdown occurs, the levered balance sheet and stretched valuation could trigger significant multiple compression, destroying shareholder value.

Data from SEC filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer