Interactive Brokers Group, Inc.IBKRNASDAQ
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DCF Valuation
DCF Valuation Summary
Strong Buy
Fair Value: $112.42 per share(market-calibrated)
+66.2%
Upside to Fair Value
Current
$67.66
Pure Model
$113.01
Fair Value
$112.42
Bull Case
$114.59
Bear Case
$107.39
Market Reality Check
Model Terminal Growth
2.50%
Market-Implied Growth
0.50%
Calibrated Growth
1.80%
Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $113.01.
What's Driving This Ratingfor IBKR
✓
CapEx already efficient
CapEx at 0.61% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.
↑
Margin expansion modeled
Current EBIT margin is 79.28% — below the sector mature average of 85.99%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $9.0B (79.28% margin).
→
Moderate revenue growth
Analyst consensus projects -32.81% revenue growth, fading to 2.50% by Year 10. Revenue reaches $11.4B (vs $10.2B today).
🎯
Market pricing in lower growth than model
The market implies only 0.50% perpetual growth — 200bps below the model's 2.50%. This suggests the market sees headwinds or risks not in the model.
✓
Strong cash flow conversion
Year 10 FCF/EBITDA conversion of 90.35% indicates efficient cash generation. FCF reaches $8.2B by Year 10 (72.41% FCF margin).
Weighted Average Cost of Capital (WACC)
Cost of Equity (CAPM)
Risk-Free Rate (Rf)4.50%
Beta (β)1.22
Market Risk Premium4.50%
*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)
Cost of Equity (Re)10.01%
Cost of Debt
Pre-tax Cost of Debt13776.84%
Tax Rate8.68%
After-tax Cost of Debt12581.37%
Equity Weight (E/V)99.94%
Debt Weight (D/V)0.06%
WACC Calculation
WACC = (E/V × Re) + (D/V × Rd × (1-Tc))
WACC = (99.94% × 10.01%) + (0.06% × 12581.37%)
= 17.93%
10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)
| Year | Year 1 | Year 3 | Year 5 | Year 7 | Year 10 |
|---|---|---|---|---|---|
| Revenue | $6.9B | $8.6B | $10.0B | $10.6B | $11.4B |
| EBIT | $5.5B | $6.9B | $8.0B | $8.4B | $9.0B |
| Tax | $473M | $595M | $691M | $726M | $782M |
| NOPAT | $5.0B | $6.3B | $7.3B | $7.6B | $8.2B |
| + Depreciation | $59M | $75M | $87M | $91M | $98M |
| - Capex | $42M | $53M | $61M | $64M | $69M |
| - Δ NWC | -$336M | $118M | $25M | $26M | $28M |
| Free Cash Flow | $5.3B | $6.2B | $7.3B | $7.6B | $8.2B |
| Discount Factor | 0.848 | 0.610 | 0.438 | 0.315 | 0.192 |
| Present Value | $4.5B | $3.8B | $3.2B | $2.4B | $1.6B |
FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital
Terminal Value Calculation
Perpetuity Growth Method
Year 10 FCF$8.2B
Terminal Growth Rate2.50%
WACC17.93%
TV = FCF₁₀ × (1+g) / (WACC-g)
Terminal Value$54.7B
PV of Terminal Value$10.5B
Exit Multiple Method
Year 10 EBITDA$9.1B
Exit Multiple (EV/EBITDA)12.0x
TV = EBITDA₁₀ × Exit Multiple
Terminal Value$109.3B
PV of Terminal Value$21.0B
Valuation Summary
Perpetuity Growth Method
PV of Projected FCFs$29.6B
PV of Terminal Value$10.5B
Enterprise Value$40.1B
(-) Net Debt-$4.9B
Equity Value$45.1B
Shares Outstanding445M
Price per Share$101.22
Exit Multiple Method
PV of Projected FCFs$29.6B
PV of Terminal Value$21.0B
Enterprise Value$50.6B
(-) Net Debt-$4.9B
Equity Value$55.6B
Shares Outstanding445M
Price per Share$124.80
Pure Model Fair Value
$113.01
Average of perpetuity growth and exit multiple methods (before market calibration)
Sensitivity AnalysisPrice per Share
| WACC ↓ / Growth → | 1.50% | 2.00% | 2.50% | 3.00% | 3.50% |
|---|---|---|---|---|---|
| 15.93% | $125.97 | $126.58 | $127.23 | $127.93 | $128.69 |
| 16.93% | $118.71 | $119.20 | $119.73 | $120.29 | $120.90 |
| 17.93% | $112.19 | $112.59 | $113.01 | $113.47 | $113.95 |
| 18.93% | $106.29 | $106.62 | $106.97 | $107.34 | $107.73 |
| 19.93% | $100.94 | $101.21 | $101.50 | $101.81 | $102.13 |
How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.
Scenario Analysis
Bear Case
$107.39
58.7% vs current
- • -25% vs analyst consensus
- • Terminal growth: 2.0%
- • Beta: 1.53
Base Case
$113.01
67.0% vs current
- • Analyst consensus
- • Terminal growth: 2.5%
- • Beta: 1.22
Bull Case
$114.59
69.4% vs current
- • +25% vs analyst consensus
- • Terminal growth: 3.0%
- • Beta: 1.04
Key Assumptions & Drivers• Financial Services Sector
Growth Assumptions (Select Years)
Year 1 Revenue Growth-32.81%
Year 3 Revenue Growth15.74%
Year 5 Revenue Growth2.50%
Year 7 Revenue Growth2.50%
Year 10 Revenue Growth2.50%
Terminal Growth Rate2.50%
Margin & Efficiency
Current EBIT Margin79.28%
Terminal EBIT Margin85.99%
Tax Rate8.68%
Historical Capex / Rev0.61%
NWC / Revenue10.00%
Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.
Institutional-Grade Methodology
Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta
Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 12x EV/EBITDA (Financial Services sector)
This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.