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4 Reasons Why Interactive Brokers (IBKR) is a Solid Pick Now


Interactive Brokers Group, Inc. IBKR seems to be an attractive pick right now given its strong fundamentals and solid growth prospects.

In the last 30 days, the Zacks Consensus Estimate for the company’s earnings has increased 5.8% for 2017 and 3.7% for 2018 to $1.63 and $1.70, respectively. This reflects analysts’ optimism about its future prospects. The stock currently carries a Zacks Rank #2 (Buy).

Further, shares of Interactive Brokers have rallied 47.8% so far this year, significantly outperforming the industry’s gain of 7.2%. This impressive price performance reflects investors’ positive stance following the company’s decision to restructure its operations in May.

Key aspects that make Interactive Brokers an attractive investment option are:

Restructuring Initiatives: Given a low volatile environment, Interactive Brokers announced its decision to close down majority of its operations in the Market Making segment and completely wind it up by the end of 2017. In sync with this, it sold U.S. options-market-making business (Timber Hill) in October.

Management now plans of focus solely on strengthening the Electronic Brokerage segment. These efforts will likely support the company’s financials going forward.

Revenue Strength: Interactive Brokers’ revenues increased at a compound annual growth rate of 9.1% in the last four years (2013-2016). Also, the top line is expected to grow 13% and 9.9% in 2017 and 2018, respectively.

Earnings Per Share (EPS) Growth: Interactive Brokers witnessed EPS growth of 11.3% in the last three to five years. The trend is expected to continue in the near term. The company’s earnings are projected to grow 30.4% and 4.3% in 2017 and 2018, respectively.

Further, its long-term (three to five years) expected EPS growth of 13.4%, higher than the industry average of 10.9%, promises rewards for shareholders.

Strong Leverage: Interactive Brokers doesn’t use debt to finance its operations. On the other hand, the industry’s debt/equity ratio is 0.22. This reflects that the company will be financially stable even in adverse economic conditions.

Other Stocks to Consider

A few other top-ranked stocks in the same space are TD Ameritrade Holding Corporation AMTD, Stifel Financial Corp. SF and Raymond James Financial, Inc. RJF.

TD Ameritrade witnessed a 9.6% upward earnings estimate revision for the current year in the last 30 days. Its share price has increased 11.5% so far this year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Stifel Financial’s shares have gained 4.7% year to date and its Zacks Consensus Estimate for the current year was revised 1.5% upward in the last 30 days. It also sports a Zacks Rank #1.

Raymond James currently carries a Zacks Rank #2. Its earnings estimates have been revised 1.4% upward for the current year in the last 30 days. Its share price has increased 21.5% so far this year.

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