Interactive Brokers currently trades at $65.51 and has been a dream stock for shareholders. It’s returned 368% since December 2020, blowing past the S&P 500’s 86.4% gain. The company has also beaten the index over the past six months as its stock price is up 27.8% thanks to its solid quarterly results.
Is there a buying opportunity in Interactive Brokers, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free for active Edge members.
Why Is Interactive Brokers Not Exciting?
We’re glad investors have benefited from the price increase, but we don't have much confidence in Interactive Brokers. Here is one reason we avoid IBKR and a stock we'd rather own.
High Debt Levels Increase Risk
Interactive Brokers reported $5.13 billion of cash and $29.62 billion of debt on its balance sheet in the most recent quarter.
As investors in high-quality companies, we primarily focus on whether a company’s profits can support its debt.
With $4.61 billion of EBITDA over the last 12 months, we view Interactive Brokers’s 5.3× net-debt-to-EBITDA ratio as inadequate. The company’s lacking profits relative to its borrowings give it little breathing room, raising red flags.
Final Judgment
Interactive Brokers isn’t a terrible business, but it isn’t one of our picks. With its shares outperforming the market lately, the stock trades at 28.9× forward P/E (or $65.51 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're fairly confident there are better investments elsewhere. Let us point you toward a dominant Aerospace business that has perfected its M&A strategy.
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