Interactive Brokers Group, Inc. (IBKR)

Total return at 5 years: -2.1%/year = -2.7% appreciation + 0.5% dividend. The target price ($80) is ex-dividend; the $2 in dividends collected over 5 years are added separately.

The methods disagree: one places the value today above the price ($92) and the other below.

Today — expensive, no margin of safety: at $92 trades ~38.4% above its value discounted to today (~$66); the expected return does not even reach the risk-free rate (4.5%).

At 5 years — Sobrevalorado: the expected total return is negative — the price already discounts a demanding scenario that, if not met, results in a loss.

The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$41.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($92) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (11.5%/year) than we project (13.5%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$1.9 bn of owner earnings in year 5 (vs ~$2.1 bn of our base case). It recalculates if the DCF assumptions are edited.

A bank is valued on equity (P/E × common earnings + price/tangible book), not EV: deposits and debt are funding. It returns capital via dividend + buyback —the buyback reduces the share count, so earnings per share grow faster than aggregate earnings—. Total return adds the dividend collected along the way. In edit mode, the metric, shares, dividend, and exit multiple can be adjusted.

An electronic broker is valued on equity (P/E on common earnings plus P/tangible book value), not on enterprise value: client credit balances (US$182.4 billion of US$247.3 billion in assets) are operating funding, not capital structure, and margin loans are over-collateralized. Rolling grid: year 0 is the actual trailing period through Jun-2026 (common earnings US$1,126 million, XBRL) and the projection is twelve-month windows. Common earnings is the amount attributable to the parent: the publicly traded partnership owns ~26.3% of IBG LLC and Holdings holds the remaining 73.7%, so the noncontrolling interest takes US$3,770 million of the US$4,896 million in consolidated trailing-period earnings. The tax rate on that attributable portion is 29.0% (US$460 million in tax on US$1,586 million of attributable pre-tax income, i.e. the consolidated US$5,356 million less the US$3,770 million noncontrolling-interest share); the consolidated effective rate of 8.7% is an artifact of the corporate structure — Holdings is a pass-through vehicle that pays no entity-level tax — and does not describe the burden on the publicly traded class's shareholder. Year 0 is not normalized: the Q2'26 release's non-GAAP reconciliation shows reported and adjusted earnings per share equal at US$0.69, and the gap between reported net revenues (US$1.90 billion) and adjusted (US$1.88 billion) is currency diversification and investment revaluation, US$20 million out of nearly nineteen hundred. The revenue path starts at +19.0% — within the trajectory band (FY24 +19.5%, FY25 +19.7%, trailing period +21.3%) and below the latest quarter's +28%, which is not extrapolated — and decelerates smoothly to +10.0% by year 5; the pre-tax margin cedes from 78.0% to 75.5% in the base case. The share count is held flat across the three scenarios, and that is a declaration, not an oversight: the company does not buy back stock (the XBRL buyback concept is zero) and the rise in share count comes from the exchange of Holdings interests for Class A shares, which raises the fraction of IBG LLC the publicly traded partnership owns in the same proportion and is therefore neutral to earnings per share; stock-based compensation dilution is already expensed within the metric. Year 0's dividend is the current declared rate: the board declared US$0.0875 per share per quarter on Jul-21-2026, payable Sep-14-2026, or US$0.35 annualized (the market data provider returned zero, and that was discarded against the fact from the release and the XBRL). Exit multiple 17x in the base case, within the 14-18x band for the electronic-broker archetype and high within it on the 77% pre-tax margin, the 19.2% return on tangible capital and 34% account growth. The Q2'26 release contains no revenue or earnings-per-share guidance for the fiscal year — the company does not publish forecasts — so the path is anchored on the trajectory and the operating drivers, and that is declared.

Today's multiple compresses on its own going forward as the metric per share grows (accelerated by the buyback, which reduces the share count). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—. Total return adds the dividend collected; the required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $80 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $92, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $80 in 5 years plus $2 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $66. Against the current market price ($92), the margin of safety is -38.4% (trades above the maximum → a premium is paid) and the total return at that price would be -2.1% annually.

• Entry multiple. P/E 37× on earnings per share of US$2.50, against a 14-18x exit band for the archetype.
• Expected total return. ~-2%/year in the base case, below the 4% floor and far from the 10% bar.
• Dividend yield. 0.4% on a payout of ~14% of earnings: the return has to come from price, and the price is already priced in.

• Moat and its direction. Wide on cost and scale, declared stable: the filing does not publish a series showing a unit-economics gap opening against competitors.
• Predictable cash generation. Operating cash flow is inflated by the movement of client balances (US$15.9 billion in the trailing period against US$1.1 billion of common earnings): it is funding, not shareholder cash. Earnings is the clean metric.
• Cyclicality of the main engine. 55.7% of revenue depends on the level of rates and 35.5% on trading volume: two variables the company does not control.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

The business breaks down into volume by fee across its two main lines. Commissions are trades executed for a per-unit fee, with average daily trades at 4.82 million (+36% year over year). Net interest income is the average balance by spread: margin loans of US$108.5 billion earning a lending rate, plus client credit balances of US$182.4 billion on which a below-market rate is paid above US$10,000. That is why accounts and client equity are the leading indicators: each new account contributes to both lines at once. Prior-year levels are derived from the year-over-year changes the Q2'26 release states alongside each level.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Reinvestment runway. Clients in more than 200 countries with ~30% of revenue from outside the United States and low marginal cost per new jurisdiction.
• Account growth. 5.19 million cleared accounts, +34% year over year, with client equity +40%: growth is by volume, not by fee.

• Relevant in 10 years (recurrence). Securities brokerage is market infrastructure and the client base is recurring and granular: no client exceeds 2% of commissions.
• Pricing power. Limited by design: the strategy is to compete on low cost, and commission-free brokerage pressures the line. The power lies in the cost structure, not in setting price.
• Operating leverage. The pre-tax margin rose from 75% to 77% while revenue grew 28% year over year: the automated platform absorbs volume without proportional cost.

• ✓Value creation (ROTCE − 10% bar)+9pp
• ✓Funding (deposit base)Deposits $182.4 bn

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Regulatory capital. US$14.1 billion in excess over minimums across operating subsidiaries at year-end 2025.
• Credit risk. Margin loans (US$108.5 billion) are over-collateralized with automatic real-time liquidation; there is no unsecured credit book.
• Clearing risk. As a clearing member it participates in loss mutualization if another member defaults beyond its collateral: an exposure unrelated to its own operations.

How cash comes in and how it is deployed. In green, the business's own cash (the owner-FCF it generates and reinvests); in gray, the float and credit — customer and funding money, which is not the shareholder's.

The surplus is retained almost entirely to fund growth in the margin loan book and to sustain the regulatory capital of the operating subsidiaries, which already carry US$14.1 billion in excess over minimums. The current quarterly dividend is US$0.0875 per share (declared Jul-21-2026, payable Sep-14-2026), or US$0.35 annualized. There is no buyback: the corresponding XBRL concept has been zero for more than a decade. Retaining at a 19.2% return on tangible capital is the right decision while that profitability holds.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Founder's stake. Thomas Peterffy retains ~73.7% of combined voting power: maximum alignment with the long-term outcome.
• Corporate governance. A controlled company under listing-exchange rules: the founder elects the board by himself and sits on the committee that sets compensation, a conflict the filing itself acknowledges.
• Capital allocation. Retains ~86% of earnings to grow the margin book, with no buyback and a modest dividend payout: consistent with a 19.2% return on tangible capital.

• No positive source of discount is identified: the company joined the S&P 500 index on Aug-28-2025 — which the 10-K itself describes as driving greater index-fund ownership and a broader institutional base — and it trades at a multiple well above its archetype's band.
• The market is paying for the operating acceleration — accounts +34%, client equity +40%, margin loans +67% — and for a 77% pre-tax margin extended forward with no compression.
• The price also embeds the current level of rates being sustained: 55.7% of net revenues depends on the spread over client balances.

Without identifiable missing buyers or motivated sellers, it is not cheap: it is an excellent business at a full price. The corporate structure — the Class A share represents ~26.3% of the operating partnership — makes the apparent multiple pricier than the consolidated size would suggest, and that is a fact from the filing, not a source of discount. EDGAR's index was reviewed after the 10-Q of Aug-6-2026 and there are no new material facts: the only filings since then are Forms 4; the Jul-31-2026 issuances (exchange of 2,499,567 shares under the Exchange Agreement with Holdings and up to 920,000 shares for the promotional program) already fall within the trailing period this record uses.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -13%/year (-51% total): the margin of safety protects the downside. The bull (+3%/year, +14% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Rate sensitivity. The main engine is the spread on client balances; a rate-cutting cycle compresses it and the moat cannot prevent it.
• Volume dependence. The filing states that results have varied significantly between periods and that comparisons may not be meaningful.
• Forecast-contract regulatory framework. A new category with an evolving legal framework and heightened scrutiny of certain contract types.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A wide moat and ROTCE 19% above the 10% bar, but the price sits above value (no margin) → great business, expensive.

• Peter Lynch Growth at a reasonable price (GARP)

  A fast grower growing 14% at a PEG of 2.7 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Not applicable — the Magic Formula excludes financials and regulated businesses (EBIT/EV does not capture the operating leverage).

• Howard Marks Perception vs reality + cycle

  The price discounts 11% vs our 14%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -14%/yr over 5y (material loss) → risk of permanent capital loss.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: cost advantage, efficient scale, switching costs, network effects, intangibles → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting 11%, within what we project (14%) — the story squares with the numbers.