Interactive Brokers is in a buy zone after the stock cleared a buy point Monday. The brokerage is the IBD Stock Of The Day.
Although Charles Schwab remains the largest brokerage with a market capitalization of $173 billion, Interactive Brokers has become a major player in the industry. Its market cap of nearly $30 billion places it among the five largest brokerages, according to IBD MarketSurge.
The company joined the S&P 500 index on Aug. 28.
Founded by options trading pioneer Thomas Peterffy, the firm was one of the first to offer options tools. Today, it also offers stocks, futures, currencies, bonds, cryptocurrencies and funds through a platform with access to 160 global markets. Its ForecastTrader provides markets on elections, the economy and other events.
Interactive Brokers is popular with active traders. In August, the average client account made 187 trades on an annualized basis.
Interactive Brokers Trading Activity
Also in August — the most recent month reported — Interactive Brokers announced more than 4 million client accounts, a year-over-year increase of 32% and up 2% from the prior month. August daily average revenue trades rose 29% to 3.488 million, about the same vs. July. Ending client equity of $713.2 billion rose 38% over the year-ago period, and up 4% from the prior month.
Market volatility in the second quarter resulted in trading volumes in stocks, options and futures rising 31%, 24% and 18%, respectively, vs. a year ago.
Interactive Brokers has a Composite Rating of 98, the fifth highest in the industry. According to IBD Stock Checkup, the company's three-year EPS growth rate is 42%. Its three-year sales growth rate is 35%.
IBD's investment banks and brokerages industry group is No. 30 of 197 groups. It's been one of the best groups in the financial sector this year.
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Interactive Brokers will announce third-quarter earnings on Oct. 16 after the market close. Analysts polled by FactSet, on average, expect earnings to climb 18% to 52 cents a share. Revenue is expected to rise 7.1% to $1.462 billion.
Most analysts have buy or hold ratings on the stock. Only one of the 10 analysts has a sell rating.
Stock Analysis
Interactive Brokers stock on Monday climbed above the 68.07 buy point of a cup base. Volume was below average. Investors generally want to see volume at least 40% above average to validate a breakout. Still, the relative strength line is near new highs, a good sign. The stock found support at its 50-day moving average as it built the base.
After a negative price reversal Tuesday, the stock was back near its buy point.
Interactive Brokers stock has a 21-day average true range (ATR) of 2.98%. The average true range, available on IBD MarketSurge, gauges the characteristic breadth of a stock's behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.
With the S&P 500 and Nasdaq now in a power trend, investors can buy stocks with ATRs up to 8%, though they should not be too concentrated in such stocks.
