Interactive Brokers Group, Inc.IBKRNASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $113.68 per share(market-calibrated)

+63.8%

Upside to Fair Value

Current

$69.40

Pure Model

$114.29

Fair Value

$113.68

Bull Case

$115.97

Bear Case

$108.49

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: $114.29.

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%)

= 17.73%

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	0.849	0.613	0.442	0.319	0.195
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%

WACC17.73%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$55.4B

PV of Terminal Value$10.8B

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$21.4B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$29.9B

PV of Terminal Value$10.8B

Enterprise Value$40.7B

(-) Net Debt-$4.9B

Equity Value$45.6B

Shares Outstanding445M

Price per Share$102.46

Exit Multiple Method

PV of Projected FCFs$29.9B

PV of Terminal Value$21.4B

Enterprise Value$51.2B

(-) Net Debt-$4.9B

Equity Value$56.2B

Shares Outstanding445M

Price per Share$126.12

Pure Model Fair Value

$114.29

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%
15.73%	$127.51	$128.14	$128.82	$129.56	$130.36
16.73%	$120.09	$120.60	$121.15	$121.74	$122.37
17.73%	$113.43	$113.85	$114.29	$114.76	$115.27
18.73%	$107.42	$107.76	$108.12	$108.51	$108.92
19.73%	$101.96	$102.24	$102.54	$102.86	$103.20

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

$108.49

56.3% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.53

Base Case

$114.29

64.7% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 1.22

Bull Case

$115.97

67.1% 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.

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