InteractiveBrokers and OptionsXpress -Benefitting from a Market Rebound
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|
|*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.
Peak - Trough
|Est. Gains @16x
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 average P/E 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.
Disclosure: Author is long IBKR and OXPS shares and short IBKR and OXPS options.