Interactive Brokers has built a cup-with-handle base and is approaching a buy point of 81.56 on the strength of growth prospects. The IBD 50 member is today's pick for IBD 50 Stocks To Watch.
IBKR stock gained nearly 1% Wednesday and is trading above its 50-day and 200-day moving averages, according to IBD MarketSmith. The relative strength line is lagging the stock but trending higher.
Interactive Brokers is an emerging leader in IBD's investment banking and brokerages industry group, which is ranked No. 12 out of 197 groups. It jumped from No. 47 three months ago. Recent earnings from industry leaders, including Charles Schwab and LPL Financial, are boosting the group.
The stock surged on strong volume for two days after the company released its third-quarter earnings Oct. 18. Interactive Brokers has a high Composite Rating of 98, while its Relative Strength Rating is a lofty 95.
Brokerage Stock Benefits From Interest Income
A top-notch A grade for its sales, profit margins and return of investors' money indicates the bank's impressive performance in the most recent quarters and year. IBKR was also named among the top-three online brokers by IBD last January in the categories of website security, after-hour trading and options trading platforms.
The Greenwich, Conn.-based online brokerage offers trading in stocks, bonds, futures, currencies and options in over 33 countries. Net revenue nearly doubled over the year to a stupendous $790 million in the third quarter. Earnings per share of $1.08 grew 38% from last year.
Net interest income grew to $473 million, or 73%, as the benchmark interest rate spiked. A small decrease in margin lending offset the growth.
The company also announced a dividend of 10 cents a share to shareholders on record as of Dec. 1. Mutual funds own 43% of shares outstanding. More funds have shown interest in the stock over the last five quarters, although interest dipped marginally in the most recent quarter.
Going forward, analysts are also bullish on the stock, with FactSet's analyst survey estimating IBKR to earn $1.18 a share on revenue of $927 million in the fourth quarter.
IBKR holds the third spot among its peers in the investment banking group, behind StoneX and Futu.
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