We came across a bullish thesis on Interactive Brokers Group, Inc. on Compounding Dividends’s Substack. In this article, we will summarize the bulls’ thesis on IBKR. Interactive Brokers Group, Inc.’s share was trading at $75.45 as of January 28th. IBKR’s trailing and forward P/E were 34.00 and 33.44 respectively according to Yahoo Finance.
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Interactive Brokers is a global electronic brokerage platform serving over 3.6 million client accounts across nearly 200 countries, with the majority of its revenue generated in the United States. The company enables trading across virtually all asset classes on more than 150 exchanges worldwide, catering to a broad client base ranging from retail investors to hedge funds and institutional players.
Its business model is split between interest income, which accounts for roughly 60% of revenue and is generated from investing nearly $100 billion of client cash balances into short-term securities and margin loans, and non-interest income derived from commissions and transaction fees. While this structure can resemble a bank, Interactive Brokers differentiates itself through minimal leverage, highly liquid assets, and conservative risk management, limiting balance sheet risk even in volatile rate environments.
Founded by Thomas Peterffy in 1977, the company remains an owner-operator business, with Peterffy and affiliates retaining effective control and a deeply tenured management team that has been in place for decades. This continuity underpins a strong culture of efficiency, automation, and customer focus, allowing Interactive Brokers to maintain industry-leading cost advantages, transparent pricing, and a refusal to sell order flow despite potential short-term gains. These attributes translate into exceptional financial metrics, including gross margins above 90% and returns on invested capital exceeding 20%, supported by a highly scalable, low-capex operating model.
Interactive Brokers benefits from long-term structural tailwinds, including growth in hedge funds, ETFs, and tech-savvy retail investors seeking low-cost, sophisticated trading platforms. Although earnings are sensitive to interest rate cycles and stock-based compensation is elevated, the company’s strong balance sheet, durable growth in accounts and earnings, and long-term compounding track record support a high-quality investment profile. Despite trading above historical valuation multiples, Interactive Brokers has consistently created shareholder value and remains positioned for sustained growth over time.
