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After college at The American University [BS - 1971] and dental school at University of Pennsylvania [DMD - 1977] Paul served as a dental officer in the United States Air Force both domestically and overseas in Turkey and England. As his student loans diminished he was seduced by the market.... More
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  • InteractiveBrokers and OptionsXpress -Benefitting from a Market Rebound  0 comments
    Nov 10, 2009 09:36 AM | about stocks: IBKR, OXPS
    Both IBKR and OXPS are major players in the once-again booming options markets, as well as in equities, futures and FOREX. As risk aversion declines their businesses are expected to see gains in both absolute account numbers and trading volumes.
     
    Both companies sport clean balance sheets and solid profitability with substantially better results expected for 2010. Each stock is down dramatically from their bull market valuations and now trades at nice discounts to the better-known industry competitors Charles Schwab and TD Ameritrade based on P/E and P/BV.
     
    I believe this translates to a great opportunity for investors seeking good-quality shares that have yet to reflect the improving market conditions. Compare the values available for IBKR and OXPS versus AMTD and SCHW based on current prices.
     
     
    Company
    11/9/09 Close
     
    2009 Est.
     
    2010 Est.
    2009
    P/E
    2010
    P/E
    Price
    B/V
    IBKR
    $17.14
    1.10
    1.47
    15.6x
    11.7x
    1.2x
    OXPS
    $15.85
    1.06
    1.29
    15.0x
    12.3x
    2.9x
    AMTD*
    $20.38
    1.05
    1.25
    19.4x
    16.3x
    3.5x
    SCHW
    $17.83
    0.72
    0.89
    24.8x
    20.0x
    4.5x
     
    *AMTD reflect FYs ending Sep. 30
     
    Using a very conservative assumption of just 16 times next year’s projections, leads me to the following target prices for these four stocks.
     
     
    Company
    2007-2008
    Peak Price
    2008-2009
    Trough Price
    % Drop from
    Peak - Trough
    Est. Gains @16x 2010 EPS
    IBKR
    $35.93
    $12.68
    (64.7%)
    37.2%
    OXPS
    $34.95
    $8.38
    (76.0%)
    30.2%
    AMTD*
    $23.50
    $9.30
    (60.4%)
    (1.9%)
    SCHW
    $28.80
    $11.00
    (61.8%)
    (20.1%)
     
    Here are the average multiples over the past few years for each of these companies since 2005. Based on today’s prices and next year’s projections IBKR and OXPS seem to offer much better upside and less risk than Schwab and Ameritrade.
     
    Company
    Average P/E
    Est. 2010 P/E
    Discount to Avg.
    IBKR*
    16.8x
    11.7x
    30.4%
    OXPS
    18.1x
    12.3x
    32.0%
    AMTD
    17.1x
    16.3x
    4.7%
    SCHW
    21.7x
    20.0x
    7.8%
    * IBKR's average since its 2007 IPO 
     
    Outright purchase of both IBKR and OXPS offers better than 30% upside over the next 12 months based simply on a regression to more normalized valuation metrics and a somewhat improving overall market.
     
     

    INTERACTIVE BROKERS GROUP REPORTS BROKERAGE METRICS FOR OCTOBER 2009 AND ANNOUNCES UPCOMING PRESENTATION

    Interactive Brokers Group, Inc. (NASDAQ GS: IBKR) an automated global electronic market maker and broker, today reported its Electronic Brokerage monthly performance metrics for October and announced that Chairman and Chief Executive Officer Thomas Peterffy will present at the Keefe, Bruyette & Woods 2009 Securities Brokerage and Market Structure Conference on Thursday, November 5, 2009 at 11:15 a.m. EST.

    Highlights for the month included:

    Ending customer equity of $14.1 billion, 58% higher than October 2008 and 5% higher than prior month.

    Ending customer credit balances of $10.1 billion and customer margin loan balances of $3.0 billion.

    330 thousand Daily Average Revenue Trades (DARTs) in October 2009, up 2% from prior month.

    645 annualized average cleared DARTs per customer account.

    129.8 thousand customer accounts, 19% higher than October 2008 and 2% higher than prior month


     
    Disclosure: Author is long IBKR and OXPS shares and short IBKR and OXPS options.
    Themes: long ideas, financials Stocks: IBKR, OXPS
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