Head to Head Review: Interactive Brokers Group (IBKR) vs. Charles Schwab Co. Common Stock (SCHW)

Interactive Brokers Group (NASDAQ: IBKR) and Charles Schwab Co. Common Stock (NYSE:SCHW) are both large-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their profitability, earnings, institutional ownership, dividends, analyst recommendations, valuation and risk.

Dividends

Interactive Brokers Group pays an annual dividend of $0.40 per share and has a dividend yield of 0.6%. Charles Schwab Co. Common Stock pays an annual dividend of $0.40 per share and has a dividend yield of 0.7%. Interactive Brokers Group pays out 26.1% of its earnings in the form of a dividend. Charles Schwab Co. Common Stock pays out 24.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Charles Schwab Co. Common Stock has raised its dividend for 2 consecutive years. Charles Schwab Co. Common Stock is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Interactive Brokers Group and Charles Schwab Co. Common Stock’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Interactive Brokers Group 4.58% 2.04% 0.22%
Charles Schwab Co. Common Stock 28.80% 16.84% 1.11%

Analyst Ratings

This is a summary of current recommendations and price targets for Interactive Brokers Group and Charles Schwab Co. Common Stock, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Interactive Brokers Group 2 3 3 0 2.13
Charles Schwab Co. Common Stock 1 8 8 0 2.41

Interactive Brokers Group currently has a consensus target price of $65.43, indicating a potential downside of 7.05%. Charles Schwab Co. Common Stock has a consensus target price of $55.53, indicating a potential downside of 3.00%. Given Charles Schwab Co. Common Stock’s stronger consensus rating and higher possible upside, analysts clearly believe Charles Schwab Co. Common Stock is more favorable than Interactive Brokers Group.

Insider and Institutional Ownership

15.1% of Interactive Brokers Group shares are held by institutional investors. Comparatively, 80.2% of Charles Schwab Co. Common Stock shares are held by institutional investors. 2.0% of Interactive Brokers Group shares are held by company insiders. Comparatively, 11.5% of Charles Schwab Co. Common Stock shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Earnings & Valuation

This table compares Interactive Brokers Group and Charles Schwab Co. Common Stock’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Interactive Brokers Group $1.93 billion 15.04 $76.00 million $1.53 46.01
Charles Schwab Co. Common Stock $8.62 billion 8.96 $2.35 billion $1.64 34.91

Charles Schwab Co. Common Stock has higher revenue and earnings than Interactive Brokers Group. Charles Schwab Co. Common Stock 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.

Risk & Volatility

Interactive Brokers Group has a beta of 0.95, indicating that its share price is 5% less volatile than the S&P 500. Comparatively, Charles Schwab Co. Common Stock has a beta of 1.51, indicating that its share price is 51% more volatile than the S&P 500.

Summary

Charles Schwab Co. Common Stock beats Interactive Brokers Group on 15 of the 17 factors compared between the two stocks.

About Interactive Brokers Group

Interactive Brokers Group, Inc. operates as an automated electronic broker in approximately 120 electronic exchanges and market centers worldwide. It specializes in executing and clearing trades in securities, futures, foreign exchange instruments, bonds, and mutual funds. The company custodies and services accounts for hedge and mutual funds, registered investment advisors, proprietary trading groups, introducing brokers, and individual investors. It offers custody, prime brokerage, securities, and margin lending services. The company provides electronic execution and clearing services. Interactive Brokers Group, Inc. was founded in 1977 and is headquartered in Greenwich, Connecticut.

About Charles Schwab Co. Common Stock

The Charles Schwab Corporation, through its subsidiaries, provides wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. The company operates through two segments, Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services, retirement plan services, and other corporate brokerage services; equity compensation plan sponsors full-service recordkeeping for stock plans, stock options, restricted stock, performance shares, and stock appreciation rights; and retail investor, retirement plan, and mutual fund clearing services. The Advisor Services segment provides custodial, trading, and support services; and retirement business and corporate brokerage retirement services. This segment provides brokerage accounts with cash management capabilities; third-party mutual funds, as well as proprietary mutual funds, plus mutual fund trading, and clearing services to broker-dealers; and exchange-traded funds (ETFs), including proprietary and third-party ETFs. It also offers advice solutions, such as managed portfolios of proprietary and third-party mutual funds and ETFs, separately managed accounts, customized personal advice for tailored portfolios, and specialized planning and portfolio management. In addition, this segment provides banking products and services, including checking and savings accounts, certificates of deposit, first lien residential real estate mortgage loans, home equity loans and lines of credit, and pledged asset lines; and trust services comprising trust custody services, personal trust reporting services, and administrative trustee services. The company serves individuals and institutional clients in the United States, the Commonwealth of Puerto Rico, England, Hong Kong, Singapore, and Australia. The Charles Schwab Corporation was founded in 1971 and is headquartered in San Francisco, California.

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