Interactive Brokers’ Super Stock Still Looks Super Attractive

Core Insights - The collaboration between American Eagle and actress Sydney Sweeney, initially met with skepticism, resulted in a significant sales uplift, driving the stock up over 35% in a single trading day, demonstrating the potential of strategic brand initiatives to create shareholder value [3]. Company Overview - Interactive Brokers (IBKR) is highlighted as a market leader in the e-brokerage sector, benefiting from strong macro tailwinds and a low-cost advantage due to superior technology [5][8]. - The e-brokerage market is projected to grow from $14.1 billion in 2024 to $34.6 billion in 2034, representing a compound annual growth rate (CAGR) of 9.4% [10]. Market Trends - Retail investor participation has risen significantly, accounting for approximately 21% of daily trading volume on the Nasdaq in 2025, up from 10% in 2020, driven by accessible and low-cost trading models [12]. - The Covid-19 pandemic catalyzed a shift towards e-brokerage platforms, with millions of individuals engaging in retail trading, a trend that has persisted and continues to grow [11][12]. Customer Growth and Trade Volumes - Interactive Brokers' customer equity increased from $56.7 billion in 2014 to $664.6 billion in Q2 2025, reflecting a 26% compounded annual growth rate [15]. - The total accounts at Interactive Brokers grew from 281 thousand in 2014 to 3.9 million by Q2 2025, with a 37% annual growth rate over the last five years [16]. - Total executed order volumes surged from 289 million in 2014 to an anticipated 976 million in 2025, marking a 6% increase from 2024 [18]. Competitive Advantages - Interactive Brokers is recognized for its superior automation, competitive pricing, and extensive international coverage, which contribute to its strong growth and profitability [20][26][27]. - The company has consistently grown revenue and net operating profit after tax (NOPAT) by 23% and 22% compounded annually since 2014 [30]. Profitability and Financial Health - Interactive Brokers boasts the highest return on invested capital (ROIC) and a strong NOPAT margin compared to publicly traded peers [33]. - The company has generated $2.7 billion in free cash flow from 2019 through the first half of 2025, equating to 6% of its enterprise value [36]. Shareholder Returns - While Interactive Brokers has returned capital to shareholders through dividends, the yield remains minimal at 0.5% [35]. - The company has paid $337 million in cumulative dividends since 2019, with a quarterly dividend increase from $0.03 per share in Q1 2019 to $0.08 per share in Q3 2025 [35]. Future Outlook - The current stock price of $64 implies that the market expects no growth in NOPAT, which appears overly pessimistic given the company's historical growth rates [41]. - If NOPAT grows at a compounded annual rate of 5%, the stock could see a 42% upside, suggesting significant potential for appreciation [43].