Lubin Investment · Blog

Is Interactive Brokers (IBKR) Stock Worth Buying?

2026-07-13 ·

IBKR: see the full analysis on Lubin Investment

Interactive Brokers passes 8 of my 10 quality criteria and trades at only 2.5 times its annual available cash, one of the lowest multiples I cover across every stock I track. This global broker, founded and led by an engineer turned billionaire, bets everything on automation to stay the cheapest in the industry. Here's why this low price deserves your attention, before its July 21 earnings.

Interactive Brokers, the insiders' broker

Interactive Brokers is an online brokerage platform that lets you buy and sell stocks, options, futures, and currencies across more than 150 markets worldwide from a single account. Unlike Robinhood or eToro, its target isn't the beginner retail crowd: it's active traders, wealth advisors, and funds who want the broadest possible access to global markets at the lowest cost.

An engineer founder, not a finance guy

Thomas Peterffy, the founder, started the company in 1977 by writing the first automated quoting algorithms himself. He remains chairman of the board and the largest shareholder today. That engineering culture runs through the entire company: Interactive Brokers invests heavily in its own market-connectivity software rather than buying third-party solutions, which lets it launch new products faster than competitors and undercut them on price.

The moat: automation that crushes costs

Interactive Brokers' competitive advantage comes down to a simple equation: fewer humans per trade, hence operating margins near 80%, a level few financial companies reach. Another notable difference cited by management: Interactive Brokers doesn't sell its order flow to intermediaries (a controversial practice called "payment for order flow," used by several free brokers) and barely trades against its own clients. The broker claims best execution as its priority, not order-flow monetization.

What my screener says: highly profitable, but mixed signals

Interactive Brokers passes 8 of my 10 criteria. Its cash margin reaches 41.1% of revenue, and both revenue growth (33.3% a year over 5 years) and cash flow per share growth (44.6% a year) are exceptional for an already-established financial company. Two points stand out, though: share count is rising slightly (+3.99% a year, moderate but real dilution), and costs have been growing a bit faster than revenue over the recent period, a margin-compression signal worth watching rather than ignoring.

The price: one of the lowest multiples in my entire screener

The stock trades at only 2.5 times its annual free cash flow. For scale: most comparable-quality companies I cover trade between 15 and 35 times. A gap this wide, for such a profitable company, is rare. My model derives a theoretical buy price far above the current price of $93.56, which translates into a discount that looks enormous on paper. I stay cautious about the exact size of that calculation: my model is sensitive to the growth assumption used, and a 44.6% annual growth rate never holds forever. The most solid and simplest signal to remember is the raw 2.5 times P/FCF figure itself, no projection assumption needed, which stays very low in absolute terms.

The real risk: interest rate sensitivity

A meaningful share of Interactive Brokers' revenue comes from interest earned on client cash and margin balances, a mechanism similar to a bank's. When interest rates fall, that revenue source shrinks, regardless of trading activity itself. It's a macro risk the broker doesn't control and needs to be kept in mind, even though its client account growth (claimed by management to run near 30% a year) partly offsets that potential headwind.

What to watch on July 21

Interactive Brokers reports second-quarter results on July 21. Watch for: the pace of new client account openings (the real structural growth engine), net interest income trends amid moving rates, and the operating margin, to check whether the recent slight compression continues or reverses.

FAQ

Why is Interactive Brokers so cheap compared to other brokers?

Its highly automated model allows operating margins near 80%, but the market has historically priced online brokers cheaper than pure tech companies, partly due to their revenue sensitivity to interest rates and more cyclical trading volumes.

Does Interactive Brokers sell its order flow like Robinhood?

No, management claims the opposite: not selling order flow to intermediaries (payment for order flow) and prioritizing best execution for the client instead of that revenue source.

What's the main risk for Interactive Brokers?

Part of its revenue comes from interest on client cash balances. A drop in interest rates would reduce that revenue source, regardless of trading volume.

Should you invest in Interactive Brokers before its July 21 earnings?

The price looks statistically very low and the business quality is solid. The main point to watch is interest rate sensitivity. This is not personalized investment advice, do your own research.

IBKR: see the full analysis on Lubin Investment

About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I find fundamental analysis fascinating, and it has delivered excellent results. For three years now, my performance has beaten the S&P 500. But analyzing every stock took too much time: sites with incomplete data, calculation methods and criteria never aligned with mine. And spotting the best stocks was just as time-consuming, even with my own well-defined checklist. So I put my software development background to work to build this software, base my investment strategy on its results, and share it with people who share the same passion as me. It judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).