Critical Analysis: Interactive Brokers Group (NASDAQ:IBKR) vs. Virtu Financial (VIRT)

Interactive Brokers Group (NASDAQ: IBKR) and Virtu Financial (NASDAQ:VIRT) are both finance companies, but which is the better stock? We will compare the two businesses based on the strength of their dividends, institutional ownership, risk, valuation, earnings, profitabiliy and analyst recommendations.

Profitability

This table compares Interactive Brokers Group and Virtu Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Interactive Brokers Group 4.97% 1.19% 0.13%
Virtu Financial 4.41% 20.72% 2.79%

Analyst Recommendations

This is a summary of recent ratings and target prices for Interactive Brokers Group and Virtu Financial, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Interactive Brokers Group 1 4 0 0 1.80
Virtu Financial 2 0 0 0 1.00

Interactive Brokers Group presently has a consensus target price of $38.60, suggesting a potential downside of 0.41%. Virtu Financial has a consensus target price of $14.50, suggesting a potential downside of 11.59%. Given Interactive Brokers Group’s stronger consensus rating and higher possible upside, analysts clearly believe Interactive Brokers Group is more favorable than Virtu Financial.

Dividends

Interactive Brokers Group pays an annual dividend of $0.40 per share and has a dividend yield of 1.0%. Virtu Financial pays an annual dividend of $0.96 per share and has a dividend yield of 5.9%. Interactive Brokers Group pays out 38.8% of its earnings in the form of a dividend. Virtu Financial pays out 133.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Insider and Institutional Ownership

14.3% of Interactive Brokers Group shares are held by institutional investors. Comparatively, 90.6% of Virtu Financial shares are held by institutional investors. 3.4% of Interactive Brokers Group shares are held by insiders. Comparatively, 69.9% of Virtu Financial shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Earnings and Valuation

This table compares Interactive Brokers Group and Virtu Financial’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Interactive Brokers Group $1.34 billion 2.00 $71.16 million $1.03 37.63
Virtu Financial $567.89 million 1.17 $29.28 million $0.72 22.78

Interactive Brokers Group has higher revenue and earnings than Virtu Financial. Virtu Financial is trading at a lower price-to-earnings ratio than Interactive Brokers Group, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Interactive Brokers Group has a beta of 0.93, meaning that its stock price is 7% less volatile than the S&P 500. Comparatively, Virtu Financial has a beta of 0.42, meaning that its stock price is 58% less volatile than the S&P 500.

Summary

Interactive Brokers Group beats Virtu Financial on 10 of the 15 factors compared between the two stocks.

About Interactive Brokers Group

Interactive Brokers Group, Inc. (IBG, Inc.) is a holding company. The Company is an automated global electronic broker and market maker specializing in routing orders, and executing and processing trades in securities, futures, foreign exchange instruments, bonds and mutual funds on over 120 electronic exchanges and market centers around the world and offering custody, prime brokerage, securities and margin lending services to customers. It operates in two segments: electronic brokerage and market making. It conducts its electronic brokerage business through its Interactive Brokers (IB) subsidiaries. It conducts its market making business through its Timber Hill (TH) subsidiaries. In the United States, it conducts its business from Greenwich, Connecticut and Chicago, Illinois. Outside the United States, it conducts business in Canada, England, Switzerland, Liechtenstein, China (Hong Kong and Shanghai), India, Australia and Japan.

About Virtu Financial

Virtu Financial, Inc. is a holding company. The Company is a technology-enabled market maker and liquidity provider to the financial markets across the world. It is engaged in buying or selling a range of securities and other financial instruments and earning small bid/ask spreads across various transactions. It has a single, multi-asset, multi-currency technology platform, through which it provides quotations to buyers and sellers in equities, commodities, currencies, options, fixed income and other securities on exchanges, markets and liquidity pools in various countries around the world. It makes markets in a range of different assets classes, such as Americas Equities; Europe, the Middle East and Africa (EMEA) Equities; Asia Pacific (APAC) Equities; Global Commodities; Global Currencies, and Options, Fixed Income and Other Securities. It makes markets for global banks, brokers and other intermediaries, and indirectly provides services to retail and institutional investors.

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