Interactive Brokers Group, Inc. (IBKR) has recently been on Zacks.com’s list of the most searched stocks. Therefore, you might want to consider some of the key factors that could influence the stock’s performance in the near future.
Over the past month, shares of this company have returned +8.3%, compared to the Zacks S&P 500 composite’s +1.5% change. During this period, the Zacks Financial – Investment Bank industry, which Interactive Brokers falls in, has gained 44.5%. The key question now is: What could be the stock’s future direction?
Although media reports or rumors about a significant change in a company’s business prospects usually cause its stock to trend and lead to an immediate price change, there are always certain fundamental factors that ultimately drive the buy-and-hold decision.
Rather than focusing on anything else, we at Zacks prioritize evaluating the change in a company’s earnings projection. This is because we believe the fair value for its stock is determined by the present value of its future stream of earnings.
We essentially look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest business trends. And if earnings estimates go up for a company, the fair value for its stock goes up. A higher fair value than the current market price drives investors’ interest in buying the stock, leading to its price moving higher. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
For the current quarter, Interactive Brokers is expected to post earnings of $1.69 per share, indicating a change of +11.2% from the year-ago quarter. The Zacks Consensus Estimate has changed +2.2% over the last 30 days.
The consensus earnings estimate of $6.89 for the current fiscal year indicates a year-over-year change of +19.8%. This estimate has changed +0.7% over the last 30 days.
For the next fiscal year, the consensus earnings estimate of $7.04 indicates a change of +2.2% from what Interactive Brokers is expected to report a year ago. Over the past month, the estimate has changed +1.4%.
With an impressive externally audited track record, our proprietary stock rating tool — the Zacks Rank — is a more conclusive indicator of a stock’s near-term price performance, as it effectively harnesses the power of earnings estimate revisions. The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #2 (Buy) for Interactive Brokers.
