Growth stock Interactive Brokers, today's selection for IBD 50 Stocks To Watch, is near a buy point that coincides with a strong earnings record, an improving interest rate environment and a relative strength line approaching a new high.
The growth stock is in a three-weeks-tight pattern with a buy point of 93.49. The stock also remains in a buy zone after breaking out past the 90.19 buy point of a consolidation, according to IBD MarketSmith pattern recognition.
Growth stock Interactive Brokers' sales and earnings have grown steadily over the past four quarters. In the quarter ended June 30, sales grew 52% to $1 billion with earnings growing 57% to $1.32 per share. A favorable interest rate environment and higher credit balances helped net income increase 99%.
Overnight Trading Expanded
Revenue from commissions was flat from the prior year as trading volume for options increased, but revenue for futures contracts and stocks fell. Nonetheless, higher options trading volume drove fees up. Fees also increased due to a nonrecurring rebate and an increase in market data access costs.
The company will pay a cash dividend of 10 cents per share to shareholders on record as of Sept. 1 as pretax profit margins came in at 67%, slightly higher than 63% the same quarter a year earlier.
Wall Street estimates 40% earnings growth for Interactive Brokers this year.
The firm was asked to pay a penalty in 2020 by the Securities and Exchange Commission related to failing to meet reporting requirements for U.S. microcap securities trading. IBKR faced similar penalties from the Financial Industry Regulatory Authority and the Commodity Futures Trading Commission for a total of $38 million.
Interactive Brokers provides automated trade execution services as well as custody services for stocks, commodities and foreign exchange across several countries. Individual investors, hedge funds, financial advisors and brokers are among those who use the platform.
In July, IBKR expanded its overnight trading to over 10,000 U.S. stocks and ETFs and allowed clients to trade nearly 24 hours a day on all five days of the trading week. Customers outside the U.S. could trade U.S. securities during their local market hours. Overnight trading hours start at 8 p.m. ET, go until 3:50 a.m. the next day and operate between Sunday night and Friday morning. Trades made during these hours will carry the next trading day date.
Growth Stock Has Sound Technical Ratings
The growth stock has a near perfect Composite Rating and EPS Rating of 98. The Relative Strength Rating of 91 is not far off and has jumped up from 84 four weeks ago.
IBKR is a stock under accumulation as seen in its Accumulation/Distribution Rating of B+.
IBKR stock ranks second in the investment banks and brokers group, according to IBD Stock Checkup.
Mutual funds own 38% of outstanding shares. Allspring Growth Fund (SGRAX) holds IBKR stock. Exchange traded funds hold the stock as well. The iShares Core S&P Mid Cap ETF and the SPDR S&P Mid Cap 400 ETF Trust also hold shares of IBKR.
Please follow VRamakrishnan on Twitter for more news on the stock market today.
