Intrinsic value of Interactive Brokers Group - IBKR

Previous Close

$41.26

  Intrinsic Value

$0.61

stock screener

  Rating & Target

str. sell

-99%

  Value-price divergence*

+1576%

Previous close

$41.26

 
Intrinsic value

$0.61

 
Up/down potential

-99%

 
Rating

str. sell

 
Value-price divergence*

+1576%

Our model is not good at valuating stocks of financial companies, such as IBKR.

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of IBKR stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 16.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  17.44
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  1,475
  1,505
  1,539
  1,579
  1,623
  1,672
  1,726
  1,785
  1,849
  1,917
  1,991
  2,070
  2,154
  2,243
  2,338
  2,439
  2,546
  2,659
  2,779
  2,905
  3,038
  3,179
  3,328
  3,484
  3,649
  3,823
  4,006
  4,198
  4,401
  4,614
  4,838
Variable operating expenses, $m
 
  955
  977
  1,002
  1,031
  1,062
  1,096
  1,134
  1,174
  1,217
  1,264
  1,314
  1,367
  1,424
  1,485
  1,549
  1,617
  1,688
  1,764
  1,845
  1,929
  2,019
  2,113
  2,213
  2,317
  2,428
  2,544
  2,666
  2,795
  2,930
  3,072
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  714
  955
  977
  1,002
  1,031
  1,062
  1,096
  1,134
  1,174
  1,217
  1,264
  1,314
  1,367
  1,424
  1,485
  1,549
  1,617
  1,688
  1,764
  1,845
  1,929
  2,019
  2,113
  2,213
  2,317
  2,428
  2,544
  2,666
  2,795
  2,930
  3,072
Operating income, $m
  761
  549
  562
  576
  592
  610
  630
  652
  675
  700
  727
  755
  786
  819
  853
  890
  929
  970
  1,014
  1,060
  1,109
  1,160
  1,215
  1,272
  1,332
  1,395
  1,462
  1,532
  1,606
  1,684
  1,766
EBITDA, $m
  786
  553
  566
  580
  596
  615
  634
  656
  679
  705
  732
  761
  791
  824
  859
  896
  936
  977
  1,021
  1,068
  1,117
  1,168
  1,223
  1,280
  1,341
  1,405
  1,472
  1,543
  1,617
  1,696
  1,778
Interest expense (income), $m
  77
  0
  -7,231
  -4,831
  -2,087
  993
  4,406
  8,151
  12,230
  16,644
  21,400
  26,504
  31,964
  37,790
  43,994
  50,587
  57,583
  64,997
  72,845
  81,144
  89,913
  99,171
  108,941
  119,244
  130,104
  141,546
  153,597
  166,285
  179,641
  193,695
  208,480
Earnings before tax, $m
  761
  549
  7,793
  5,407
  2,680
  -383
  -3,776
  -7,500
  -11,555
  -15,944
  -20,673
  -25,748
  -31,178
  -36,972
  -43,141
  -49,697
  -56,654
  -64,026
  -71,830
  -80,083
  -88,804
  -98,011
  -107,726
  -117,972
  -128,772
  -140,150
  -152,135
  -164,753
  -178,034
  -192,010
  -206,714
Tax expense, $m
  62
  148
  2,104
  1,460
  724
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  84
  401
  5,689
  3,947
  1,956
  -383
  -3,776
  -7,500
  -11,555
  -15,944
  -20,673
  -25,748
  -31,178
  -36,972
  -43,141
  -49,697
  -56,654
  -64,026
  -71,830
  -80,083
  -88,804
  -98,011
  -107,726
  -117,972
  -128,772
  -140,150
  -152,135
  -164,753
  -178,034
  -192,010
  -206,714

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  25,942
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  54,673
  55,722
  57,004
  58,469
  60,114
  61,936
  63,936
  66,113
  68,470
  71,009
  73,735
  76,650
  79,761
  83,073
  86,593
  90,329
  94,287
  98,477
  102,909
  107,591
  112,534
  117,750
  123,251
  129,050
  135,159
  141,594
  148,368
  155,499
  163,003
  170,897
  179,200
Adjusted assets (=assets-cash), $m
  28,731
  55,722
  57,004
  58,469
  60,114
  61,936
  63,936
  66,113
  68,470
  71,009
  73,735
  76,650
  79,761
  83,073
  86,593
  90,329
  94,287
  98,477
  102,909
  107,591
  112,534
  117,750
  123,251
  129,050
  135,159
  141,594
  148,368
  155,499
  163,003
  170,897
  179,200
Revenue / Adjusted assets
  0.051
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
  0.027
Average production assets, $m
  38
  38
  38
  39
  41
  42
  43
  45
  46
  48
  50
  52
  54
  56
  58
  61
  64
  66
  69
  73
  76
  79
  83
  87
  91
  96
  100
  105
  110
  115
  121
Working capital, $m
  0
  -150
  -154
  -158
  -162
  -167
  -173
  -179
  -185
  -192
  -199
  -207
  -215
  -224
  -234
  -244
  -255
  -266
  -278
  -290
  -304
  -318
  -333
  -348
  -365
  -382
  -401
  -420
  -440
  -461
  -484
Total debt, $m
  74
  -3,475
  -2,322
  -1,003
  477
  2,117
  3,917
  5,877
  7,998
  10,283
  12,736
  15,360
  18,160
  21,141
  24,309
  27,671
  31,233
  35,005
  38,993
  43,206
  47,656
  52,350
  57,301
  62,520
  68,018
  73,809
  79,907
  86,324
  93,078
  100,182
  107,655
Total liabilities, $m
  53,699
  50,150
  51,303
  52,622
  54,102
  55,742
  57,542
  59,502
  61,623
  63,908
  66,361
  68,985
  71,785
  74,766
  77,934
  81,296
  84,858
  88,630
  92,618
  96,831
  101,281
  105,975
  110,926
  116,145
  121,643
  127,434
  133,532
  139,949
  146,703
  153,807
  161,280
Total equity, $m
  974
  5,572
  5,700
  5,847
  6,011
  6,194
  6,394
  6,611
  6,847
  7,101
  7,373
  7,665
  7,976
  8,307
  8,659
  9,033
  9,429
  9,848
  10,291
  10,759
  11,253
  11,775
  12,325
  12,905
  13,516
  14,159
  14,837
  15,550
  16,300
  17,090
  17,920
Total liabilities and equity, $m
  54,673
  55,722
  57,003
  58,469
  60,113
  61,936
  63,936
  66,113
  68,470
  71,009
  73,734
  76,650
  79,761
  83,073
  86,593
  90,329
  94,287
  98,478
  102,909
  107,590
  112,534
  117,750
  123,251
  129,050
  135,159
  141,593
  148,369
  155,499
  163,003
  170,897
  179,200
Debt-to-equity ratio
  0.076
  -0.620
  -0.410
  -0.170
  0.080
  0.340
  0.610
  0.890
  1.170
  1.450
  1.730
  2.000
  2.280
  2.540
  2.810
  3.060
  3.310
  3.550
  3.790
  4.020
  4.230
  4.450
  4.650
  4.840
  5.030
  5.210
  5.390
  5.550
  5.710
  5.860
  6.010
Adjusted equity ratio
  -0.866
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  84
  401
  5,689
  3,947
  1,956
  -383
  -3,776
  -7,500
  -11,555
  -15,944
  -20,673
  -25,748
  -31,178
  -36,972
  -43,141
  -49,697
  -56,654
  -64,026
  -71,830
  -80,083
  -88,804
  -98,011
  -107,726
  -117,972
  -128,772
  -140,150
  -152,135
  -164,753
  -178,034
  -192,010
  -206,714
Depreciation, amort., depletion, $m
  25
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  12
  12
Funds from operations, $m
  279
  405
  5,693
  3,951
  1,960
  -379
  -3,772
  -7,495
  -11,550
  -15,939
  -20,668
  -25,743
  -31,173
  -36,966
  -43,135
  -49,691
  -56,647
  -64,020
  -71,823
  -80,076
  -88,796
  -98,003
  -107,718
  -117,963
  -128,763
  -140,141
  -152,125
  -164,743
  -178,023
  -191,999
  -206,701
Change in working capital, $m
  -265
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
Cash from operations, $m
  544
  408
  5,696
  3,955
  1,965
  -374
  -3,767
  -7,490
  -11,544
  -15,933
  -20,661
  -25,735
  -31,164
  -36,957
  -43,125
  -49,681
  -56,637
  -64,008
  -71,812
  -80,064
  -88,783
  -97,989
  -107,703
  -117,948
  -128,746
  -140,124
  -152,107
  -164,723
  -178,003
  -191,977
  -206,679
Maintenance CAPEX, $m
  0
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -12
New CAPEX, $m
  -27
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
Cash from investing activities, $m
  -6
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -7
  -7
  -7
  -7
  -7
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -12
  -12
  -12
  -13
  -13
  -15
  -15
  -15
  -16
  -18
Free cash flow, $m
  538
  404
  5,692
  3,950
  1,960
  -379
  -3,772
  -7,495
  -11,550
  -15,939
  -20,667
  -25,742
  -31,172
  -36,965
  -43,133
  -49,689
  -56,645
  -64,017
  -71,821
  -80,074
  -88,793
  -98,000
  -107,715
  -117,960
  -128,759
  -140,137
  -152,121
  -164,738
  -178,019
  -191,994
  -206,696
Issuance/(repayment) of debt, $m
  74
  -3,475
  1,153
  1,318
  1,480
  1,640
  1,800
  1,960
  2,121
  2,285
  2,453
  2,624
  2,800
  2,981
  3,168
  3,362
  3,563
  3,771
  3,988
  4,214
  4,449
  4,695
  4,951
  5,219
  5,498
  5,791
  6,097
  6,418
  6,753
  7,105
  7,473
Issuance/(repurchase) of shares, $m
  -1
  5,079
  0
  0
  0
  565
  3,976
  7,718
  11,791
  16,198
  20,946
  26,040
  31,489
  37,303
  43,493
  50,070
  57,050
  64,445
  72,274
  80,552
  89,298
  98,533
  108,276
  118,552
  129,383
  140,794
  152,812
  165,466
  178,785
  192,800
  207,544
Cash from financing (excl. dividends), $m  
  -163
  1,604
  1,153
  1,318
  1,480
  2,205
  5,776
  9,678
  13,912
  18,483
  23,399
  28,664
  34,289
  40,284
  46,661
  53,432
  60,613
  68,216
  76,262
  84,766
  93,747
  103,228
  113,227
  123,771
  134,881
  146,585
  158,909
  171,884
  185,538
  199,905
  215,017
Total cash flow (excl. dividends), $m
  350
  2,008
  6,845
  5,269
  3,440
  1,826
  2,004
  2,182
  2,362
  2,545
  2,731
  2,922
  3,117
  3,319
  3,528
  3,743
  3,967
  4,199
  4,440
  4,692
  4,954
  5,227
  5,513
  5,811
  6,122
  6,448
  6,789
  7,146
  7,519
  7,911
  8,321
Retained Cash Flow (-), $m
  -111
  -5,480
  -128
  -146
  -164
  -565
  -3,976
  -7,718
  -11,791
  -16,198
  -20,946
  -26,040
  -31,489
  -37,303
  -43,493
  -50,070
  -57,050
  -64,445
  -72,274
  -80,552
  -89,298
  -98,533
  -108,276
  -118,552
  -129,383
  -140,794
  -152,812
  -165,466
  -178,785
  -192,800
  -207,544
Prev. year cash balance distribution, $m
 
  882
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -2,591
  6,717
  5,122
  3,275
  1,261
  -1,972
  -5,536
  -9,429
  -13,654
  -18,215
  -23,118
  -28,372
  -33,984
  -39,965
  -46,327
  -53,083
  -60,246
  -67,833
  -75,860
  -84,344
  -93,305
  -102,764
  -112,741
  -123,260
  -134,346
  -146,023
  -158,320
  -171,265
  -184,889
  -199,223
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  -2,484
  6,149
  4,458
  2,697
  978
  -1,431
  -3,740
  -5,893
  -7,843
  -9,549
  -10,979
  -12,107
  -12,921
  -13,417
  -13,601
  -13,489
  -13,109
  -12,492
  -11,680
  -10,718
  -9,651
  -8,527
  -7,389
  -6,278
  -5,226
  -4,260
  -3,398
  -2,650
  -2,018
  -1,500
Current shareholders' claim on cash, %
  100
  15.4
  15.4
  15.4
  15.4
  15.3
  14.3
  12.8
  10.9
  8.8
  6.8
  5.0
  3.6
  2.4
  1.6
  1.0
  0.6
  0.4
  0.2
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Interactive Brokers Group, Inc. operates as an automated electronic broker and market maker in approximately 100 electronic exchanges and market centers worldwide. It specializes in executing and clearing trades in securities, futures, foreign exchange instruments, bonds, and mutual funds. The company custodies and services accounts for hedge and mutual funds, registered investment advisors, proprietary trading groups, introducing brokers, and individual investors. It offers custody, prime brokerage, securities, and margin lending services. The company provides electronic execution and clearing services; and market making services on exchanges and market centers, primarily in exchange-traded equities, equity options, and equity-index options and futures. Interactive Brokers Group, Inc. was founded in 1977 and is headquartered in Greenwich, Connecticut.

FINANCIAL RATIOS  of  Interactive Brokers Group (IBKR)

Valuation Ratios
P/E Ratio 33.4
Price to Sales 1.9
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 5.2
Price to Free Cash Flow 5.4
Growth Rates
Sales Growth Rate 17.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -10%
Cap. Spend. - 3 Yr. Gr. Rate 9.7%
Financial Strength
Quick Ratio 351
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 7.6%
Interest Coverage 11
Management Effectiveness
Return On Assets 0.3%
Ret/ On Assets - 3 Yr. Avg. 0.3%
Return On Total Capital 8.8%
Ret/ On T. Cap. - 3 Yr. Avg. 6.9%
Return On Equity 9.1%
Return On Equity - 3 Yr. Avg. 7.1%
Asset Turnover 0
Profitability Ratios
Gross Margin 94.6%
Gross Margin - 3 Yr. Avg. 94.3%
EBITDA Margin 58.5%
EBITDA Margin - 3 Yr. Avg. 51.9%
Operating Margin 51.6%
Oper. Margin - 3 Yr. Avg. 44.5%
Pre-Tax Margin 51.6%
Pre-Tax Margin - 3 Yr. Avg. 44.5%
Net Profit Margin 5.7%
Net Profit Margin - 3 Yr. Avg. 4.5%
Effective Tax Rate 8.1%
Eff/ Tax Rate - 3 Yr. Avg. 8.9%
Payout Ratio 31%

IBKR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IBKR stock intrinsic value calculation we used $1475 million for the last fiscal year's total revenue generated by Interactive Brokers Group. The default revenue input number comes from 2016 income statement of Interactive Brokers Group. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our IBKR stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for IBKR is calculated based on our internal credit rating of Interactive Brokers Group, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Interactive Brokers Group.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of IBKR stock the variable cost ratio is equal to 63.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for IBKR stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 208.1% for Interactive Brokers Group.

Corporate tax rate of 27% is the nominal tax rate for Interactive Brokers Group. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the IBKR stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for IBKR are equal to 2.5%.

Life of production assets of 10 years is the average useful life of capital assets used in Interactive Brokers Group operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for IBKR is equal to -10%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $974 million for Interactive Brokers Group - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 399.74 million for Interactive Brokers Group is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Interactive Brokers Group at the current share price and the inputted number of shares is $16.5 billion.

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COMPANY NEWS

▶ Interactive Brokers posts 2Q profit   [Jul-18-17 09:07PM  Associated Press]
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▶ Interactive Brokers: A Review for Options Trading   [Apr-24-17 05:03PM  Motley Fool]
▶ Interactive Brokers posts 1Q profit   [Apr-18-17 04:08PM  Associated Press]
▶ Why We're Excited About These 3 Top Stocks   [Apr-17-17 08:56AM  Motley Fool]
▶ Retail investor readthrough   [Apr-06-17 05:47PM  CNBC Videos]
▶ Why Interactive Brokers Was Downgraded   [11:54AM  Barrons.com]
▶ [$$] Options Trading Pioneer Blames Retreat on Fast-Trading Sharpshooters   [Mar-10-17 12:07AM  at The Wall Street Journal]
▶ [$$] A Speculative Trade on Twitter's Rise or Fall   [Feb-11-17 01:24AM  at Barrons.com]
Stock chart of IBKR Financial statements of IBKR
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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